On January 22 2022 20:13 BlackJack wrote: Anyone ever trade Options on Etrade? I dabbled a little bit buying a few calls on MEME stocks during the BANG craze that expired worthless. Finally had a hit buying a DASH Jan 21 '22 $210 Put about 4-5 months ago. I've read on etrade that any options that expire in the money are automatically exercised so I just left it. But my account value is showing as $9,300 less than it was yesterday afternoon which is last price of that Put option. I'm hoping this is just a glitch and it will be corrected on Monday? Or did I just piss away 9 grand?
To exercise a call you need the cash. Let’s say an option gives you the right to buy 100 shares at $20 and the market price is $25. That option’s value is 100x(25-20) but you can’t exercise it without having $2,000 cash on hand to buy your 100 shares. You want auto sell, not auto exercise. Auto sell sells the option to a market maker for near its intrinsic value right before expiry.
Or in this case, did you have 100 shares of DASH in your account? Your put option is giving you the right to sell those 100 shares at a price of $210, but if you don't own the shares, you can't sell them without opening a short position.
I'm not sure if E*TRADE will automatically open a short position for you in order to exercise the option, but they certainly won't if your account isn't upgraded to allow margin trading.
On January 22 2022 09:52 LegalLord wrote: Market had the worst week since the start of the pandemic. Enough to cause the Fed to forget about inflation for another several months and just let consumer prices run wild, maybe? Just long enough for stock prices to recover.
I think the market doesn't matter to them as much as the overall health of the economy. I mean we're where we were 6 months ago, not much of crash, minor correction if anything.
It'll be interesting what happens, housing prices in Canada have been crazy, but I really don't think interest rates can be raised too much... And even if they could, it'd be stupid, like a 7% interest rate with 7% inflation does nobody any good. The proper solution is to stop buying back bonds (printing money), and keep rates reasonably low (increase of 1-1.5% over the next couple years).
People just became dumb during COVID, people viewed it like some end of the world event, and completely stopped caring about future repurcussions of anything... And so we need to dig ourselves out of the hole that the ones who overpanicked caused.
On January 22 2022 09:52 LegalLord wrote: Market had the worst week since the start of the pandemic. Enough to cause the Fed to forget about inflation for another several months and just let consumer prices run wild, maybe? Just long enough for stock prices to recover.
I think the market doesn't matter to them as much as the overall health of the economy. I mean we're where we were 6 months ago, not much of crash, minor correction if anything.
A nice idea that they care about "the economy" rather than market signals, but that doesn't really hold up to scrutiny. Market signals are king; they will make up any justifications for why the economic situation isn't as bad as it is. Lot of people willing to contort logic to fool themselves into thinking that all is well at any rate.
Although, it's a choice between two bad options: 1. Leave interest rates low -> inflation gets so bad that even the fake exclude-everything-inflationary indices of inflation are showing alarmingly high levels. 2. Raise interest rates -> the decades-long debt crisis will be impossible to hide behind artificially cheap financing, and the fundamentals of badly indebted companies (i.e. most of the economy) will decay quickly after their stock price does.
Hopefully the 5-7% decline week in the stock market will panic the Fed into continuing with option 1 for another few months!
On January 22 2022 09:52 LegalLord wrote: Market had the worst week since the start of the pandemic. Enough to cause the Fed to forget about inflation for another several months and just let consumer prices run wild, maybe? Just long enough for stock prices to recover.
I think the market doesn't matter to them as much as the overall health of the economy. I mean we're where we were 6 months ago, not much of crash, minor correction if anything.
A nice idea that they care about "the economy" rather than market signals, but that doesn't really hold up to scrutiny. Market signals are king; they will make up any justifications for why the economic situation isn't as bad as it is. Lot of people willing to contort logic to fool themselves into thinking that all is well at any rate.
Although, it's a choice between two bad options: 1. Leave interest rates low -> inflation gets so bad that even the fake exclude-everything-inflationary indices of inflation are showing alarmingly high levels. 2. Raise interest rates -> the decades-long debt crisis will be impossible to hide behind artificially cheap financing, and the fundamentals of badly indebted companies (i.e. most of the economy) will decay quickly after their stock price does.
Hopefully the 5-7% decline week in the stock market will panic the Fed into continuing with option 1 for another few months!
Actually low interest rates don't cause inflation. Open market operations do. As long as the central bank isn't printing money, and interest rates remain constant, you won't have inflation... We've been at low rates for quite some time, as long as we're not lowering them more, we're fine. The main issue is the new money that was introduced into the economy in the last 2 years is slowly making its way through the pipeline. It is difficult to know how much of this new money in the market has been accounted for in the inflation.
I guess my viewpoint is that if the stock market is higher than it was 1 year ago, it's easy to view it as "oh, that was a point of overvaluation". Nobody will look at it as being in a recession, since we're still so much higher than pre-COVID. I mean don't get me wrong, I like fast stock market growth, it's been good to me for the last little while, plus I need to take our 80k in 3 months for the downpayment on my under construction house. But let's see what happens. I'm in the school of thought that for a policy maker the value of the stock market should be irrevelevent - make sound economic decisions, provide stability for investors, maximize productivity in the economy... And the stock market will follow on its own.
On January 23 2022 12:29 FiWiFaKi wrote: Actually low interest rates don't cause inflation. Open market operations do.
"Well akshually" open market operations are how the central bank (from now on I'll talk about the Fed exclusively) reaches its target interest rate. The Fed cannot simply decree that money has a certain cost and it becomes so; it sets a target, announces that target, and then fiddles with money such that the cost of borrowing becomes what it wants it to be. You may notice that this is an active operation which is constantly being done to replace the ones that expire. They keep good data for those actually willing to look at it.
It's not the only inflationary factor to be sure - supply shocks and demand recovery also impact inflation - but your quibbling over definitions doesn't mean what you think it means. By mechanisms often omitted for brevity - the Fed lowering interest rates is inflationary, especially so in the financial markets (like the stock exchanges) closest to the Fed money tap.
On January 23 2022 12:29 FiWiFaKi wrote: I'm in the school of thought that for a policy maker the value of the stock market should be irrevelevent - make sound economic decisions, provide stability for investors, maximize productivity in the economy... And the stock market will follow on its own.
That ship has sailed several generations of Fed administrators ago. In the modern era, market signals are divine.
On January 23 2022 12:29 FiWiFaKi wrote: I guess my viewpoint is that if the stock market is higher than it was 1 year ago, it's easy to view it as "oh, that was a point of overvaluation".
Maybe. Another way to see it as overvaluation is to see that valuations have consistently grown more aggressive by just about every major measure of value, over the past many years but especially over the past year. Price fluctuation may not mean "overvalued" but prices continuing to go up for several years in a row doesn't mean that it wasn't already a speculative bubble before it grew more. 2021 just gave us some of the most uncontroversial examples of bubble behavior - GME for example. But plenty of stocks were plenty overvalued in 2019, 2018, etc., due to many years of QE - a sharp upswing in the same merely made it even worse.
Frankly, your entire argument seems to be "I don't think it's overvalued because I don't want it to be" and the supporting evidence is whatever might seem to justify the already decided-upon conclusion. There's very good evidence to show that valuations are exceedingly high by historical standards - this one and the "see also" ones for example - and that this is very strongly correlated with debt growth since the 90s, QE after 2008, and most sharply the coronavirus-driven stimulus. One might be inclined to believe that if the financing environment (e.g. interest rates and the cost of borrowing they imply) were to go in the opposite direction, that valuations would follow. So it becomes a choice between either dealing with high inflation, or keeping the markets safe. Decisions, decisions.
Youtuber Meet Kevin went out of the market and simultaneously endorsed index funds & buy and holding for the majority of investors.
He stated that he only thinks people with the time to watch the markets day in and day out, spending all day watching like he does (I.e. Not reliant on his updates) should be trading individual stocks that way.
Pretty respectable take and I was very pleased to hear him endorse index funds rather appropriately.
On January 23 2022 12:29 FiWiFaKi wrote: Actually low interest rates don't cause inflation. Open market operations do.
"Well akshually" open market operations are how the central bank (from now on I'll talk about the Fed exclusively) reaches its target interest rate. The Fed cannot simply decree that money has a certain cost and it becomes so; it sets a target, announces that target, and then fiddles with money such that the cost of borrowing becomes what it wants it to be. You may notice that this is an active operation which is constantly being done to replace the ones that expire. They keep good data for those actually willing to look at it.
It's not the only inflationary factor to be sure - supply shocks and demand recovery also impact inflation - but your quibbling over definitions doesn't mean what you think it means. By mechanisms often omitted for brevity - the Fed lowering interest rates is inflationary, especially so in the financial markets (like the stock exchanges) closest to the Fed money tap.
On January 23 2022 12:29 FiWiFaKi wrote: I'm in the school of thought that for a policy maker the value of the stock market should be irrevelevent - make sound economic decisions, provide stability for investors, maximize productivity in the economy... And the stock market will follow on its own.
That ship has sailed several generations of Fed administrators ago. In the modern era, market signals are divine.
On January 23 2022 12:29 FiWiFaKi wrote: I guess my viewpoint is that if the stock market is higher than it was 1 year ago, it's easy to view it as "oh, that was a point of overvaluation".
Maybe. Another way to see it as overvaluation is to see that valuations have consistently grown more aggressive by just about every major measure of value, over the past many years but especially over the past year. Price fluctuation may not mean "overvalued" but prices continuing to go up for several years in a row doesn't mean that it wasn't already a speculative bubble before it grew more. 2021 just gave us some of the most uncontroversial examples of bubble behavior - GME for example. But plenty of stocks were plenty overvalued in 2019, 2018, etc., due to many years of QE - a sharp upswing in the same merely made it even worse.
Frankly, your entire argument seems to be "I don't think it's overvalued because I don't want it to be" and the supporting evidence is whatever might seem to justify the already decided-upon conclusion. There's very good evidence to show that valuations are exceedingly high by historical standards - this one and the "see also" ones for example - and that this is very strongly correlated with debt growth since the 90s, QE after 2008, and most sharply the coronavirus-driven stimulus. One might be inclined to believe that if the financing environment (e.g. interest rates and the cost of borrowing they imply) were to go in the opposite direction, that valuations would follow. So it becomes a choice between either dealing with high inflation, or keeping the markets safe. Decisions, decisions.
Mostly wanted to touch on your last point.
I'm not saying it's overvalued or undervalued, personally I think we're in the right ballpark... But of course it's a complex question. Higher valuations in relation to P/E over time make sense to me. Life expectancy is higher than 50 years ago, and the world climate appears more stable than historically... So the time value of money changes. A real interest rate of 4% sounds a lot more reasonable than 7% during the cold war days. To me a P/E ratio of 25 today seems reasonable from my values, whereas I can easily see a value of 15 being more reasonable back in the day.
Usually if someone thinks something is massively over or undervalued, they're missing something, rather than the entire market being irrational. I'm leveraged hard right now, but a 15% market correction to correct certain unsustainable policies doesn't frighten me. As long as it's aiming to raise productivity and technological improvement, it's good long term... Trying to squeeze a couple more percent in the stock market today and put off the problem for future generations is selfish planning.
For your second point, I'll just say I disagree. What I see make headlines is job numbers, inflation, and housing prices... Not stock market performance. I mean I want the stock market to go up, but I think it's in their best interest to flatten the increase, to say have the market grow 10% per year, rather than have a 40% growth year, followed by -15% down, then 5% up, then 10% down, so on. More stability for the investor too which gets more money into the market. So precise in those years with forecasted 40% growth, is when you want to do things that will help the real economy and society, at the expense of the stock market (so long as the stock market gets modest growth). This is exactly why I think the time to do it is now.
For your first point, thank you for info. I'll take a closer look into it. I get bored too quickly with the nitty-gritty details with this stuff, but I should be more patient. I spend more time reading financial reports from private companies, and closely following what the new generations are up to, to get a better idea for the direction or the world and what will be set up for success.
On January 23 2022 15:22 3FFA wrote: Youtuber Meet Kevin went out of the market and simultaneously endorsed index funds & buy and holding for the majority of investors.
He stated that he only thinks people with the time to watch the markets day in and day out, spending all day watching like he does (I.e. Not reliant on his updates) should be trading individual stocks that way.
Pretty respectable take and I was very pleased to hear him endorse index funds rather appropriately.
Pretty much everyone on the reddit stock/investing forums, heck, even wsb subscribes to this philosophy... And when you look at active vs passive quantities invested historically, there's been a massive shift for the last decade.
When people want the rush from gambling, then individual stocks are fine.
But most people who invest with an under 100k portfolio, the potential gains from making decisions yourself are so small relative to the opportunity cost, time and energy that could be spent over 5 years, to be making 20k per year more, rather than chasing a 15% annual return on your 5k portfolio instead of a 10% market return (and anyway, you'll most likely end up with less money than if you invested in index funds anyway).
I think active investing is attractive to many p Middle class people in their 20s and 30s is because you'll never be rich with passive investing. You can improve your life, but especially when you're poor to begin with, a 10% annual return on the 10k you manage to save up from your 60k salary feels insignificant. At least I went through that phase, I started early, never made awful financial decisions... And yeah sure, I can live poor, be quite stingy with my money, and do everything right the couch potato way, and end up with 3-10 million in my account when I'm 65. But for many middle class people, especially when you have a wife and kids, that number won't be as high as that. And a measly 5 million isn't fuck you money anyway, to pee your whole life away saving and not doing anything. Can't hire an escort everyday while your dick still works, ya know?
I mean better than losing it all buying MVIS or WISH obviously, but it isn't glamorous, so people naturally want to take fate into their own hands and do better... Especially when they're surrounded by success stories everywhere (like Tesla, AMD, crypto), while at the same time disregarding all the things that didn't perform as well. However, I do think eventually we will reach an inflection point of sorts. A lot of money is being pumped into the passive funds, particularly the S&P500 and Nasdaq 100, because in the last decade it has been taught that it is the right thing to do. It could lead to certain equities not being priced correctly, and money leaving those ETF's for other places.
The US stock market performing so well since recovering from the 2008 crash gets people to buy more because of its past success, which causes additional increases, in this positive feedback cycle. Eventually there is always a market rotation of sorts, whether its bonds over equities, different countries, commodities over tech, etc. Anyway, index ETF's are still the best for the vast majority of people (roughly half of my portfolio is), but there are signs things could change... It depends how smart you think you are, and how much time you want to commit to it.
On January 22 2022 09:52 LegalLord wrote: Market had the worst week since the start of the pandemic. Enough to cause the Fed to forget about inflation for another several months and just let consumer prices run wild, maybe? Just long enough for stock prices to recover.
I think the market doesn't matter to them as much as the overall health of the economy. I mean we're where we were 6 months ago, not much of crash, minor correction if anything.
A nice idea that they care about "the economy" rather than market signals, but that doesn't really hold up to scrutiny. Market signals are king; they will make up any justifications for why the economic situation isn't as bad as it is. Lot of people willing to contort logic to fool themselves into thinking that all is well at any rate.
Although, it's a choice between two bad options: 1. Leave interest rates low -> inflation gets so bad that even the fake exclude-everything-inflationary indices of inflation are showing alarmingly high levels. 2. Raise interest rates -> the decades-long debt crisis will be impossible to hide behind artificially cheap financing, and the fundamentals of badly indebted companies (i.e. most of the economy) will decay quickly after their stock price does.
Hopefully the 5-7% decline week in the stock market will panic the Fed into continuing with option 1 for another few months!
Why are you so negative about the fed dealing with inflation? Their track record since gaining independence is pretty good. As you probably know they has no problem increasing interest rates and tipping the economy into recession in the 80s. I think they made a mistake by treating current inflation as transitory but they've since changed their tune and we'll probably get 4-5 interest rate hikes next year. Before the pandemic they were also hiking rates.
S&P on the monthly chart. Conformed a huge bearish divergence exactly the same as the one in 2008, or rather will be conformed by the end of the month (most likely).
Conditions for a huge market sell off are very similar. Any bounces on the markets from this point onward, Im considering huge bull traps. 2008 took another 6 months after the bearish divergence to start the real dump, so we are headed towards a period that will be crucial for the markets. Of course I could be wrong, but I'd rather be wrong and miss out on few percentage gains than be rekt. I still have a small part of my portfolio for scalping and short term swing trading, but majority I have already rotated last 4 months into sectors and stocks that have been beaten up the last 10 years, where downside risk is way smaller than the potential upside reward.
Based on recent posts about FED and inflation, I think you guys are way too complacent. Of course you could be right, but you're not thinking as investors at this point, but rather as gamblers.
Look at the world stage and what's going on in many parts of the world (namely Ukraine), it takes 1 trigger for all the people who invested 10 years ago to dump the market (which they already kind of started, but the question is, are you willing to gamble they wont continue). You could be right of course, but the risk you're taking is huge.
I've been investing for 22 years and have seen this shit repat over and over. Be smart and dont try to fool yourselves that FED or anyone is going to save your ass. You could be right, but if you're wrong, you'll be rekt. Markets are designed to inflict maximum pain on those who aren't patient.
On January 22 2022 09:52 LegalLord wrote: Market had the worst week since the start of the pandemic. Enough to cause the Fed to forget about inflation for another several months and just let consumer prices run wild, maybe? Just long enough for stock prices to recover.
I think the market doesn't matter to them as much as the overall health of the economy. I mean we're where we were 6 months ago, not much of crash, minor correction if anything.
A nice idea that they care about "the economy" rather than market signals, but that doesn't really hold up to scrutiny. Market signals are king; they will make up any justifications for why the economic situation isn't as bad as it is. Lot of people willing to contort logic to fool themselves into thinking that all is well at any rate.
Although, it's a choice between two bad options: 1. Leave interest rates low -> inflation gets so bad that even the fake exclude-everything-inflationary indices of inflation are showing alarmingly high levels. 2. Raise interest rates -> the decades-long debt crisis will be impossible to hide behind artificially cheap financing, and the fundamentals of badly indebted companies (i.e. most of the economy) will decay quickly after their stock price does.
Hopefully the 5-7% decline week in the stock market will panic the Fed into continuing with option 1 for another few months!
Why are you so negative about the fed dealing with inflation? Their track record since gaining independence is pretty good. As you probably know they has no problem increasing interest rates and tipping the economy into recession in the 80s. I think they made a mistake by treating current inflation as transitory but they've since changed their tune and we'll probably get 4-5 interest rate hikes next year. Before the pandemic they were also hiking rates.
Volcker was the last Fed chair that would have been willing to stomach something like the early 80s interest rate hikes. Every chair after that has been progressively more subservient to the goal of maintaining the upward trajectory of the market. I suppose we're in the longest continuous failure in the post-80s era, if you lump the last couple of big points of interest (dotcom, '08, the corvid) together as one continuous trend of attempting to address the same event.
And if you see the last many years of QE as "a pretty good track record" then I can't say I agree. The brief moment of trying to raise interest rates in 2018 was a couple of small interest rate rises was quickly reversed immediately after a couple important financial indicators went south. The entire "transitory inflation" saga feels a lot more like gaslighting ("inflation isn't real, and even if it is, it's transitory/good/your fault anyways") than a mistake as you want to characterize it. You are being far too charitable here on both the Fed's results and their intentions.
I don't envy the reality of what it would mean to change course on the current financial market / interest rate trap. But given that it's what they've done for years, I fully expect the Fed to do the absolute minimum to try to reel in inflation & the financial markets, and to continue to systematically undervalue inflation by whatever means they can. I also expect that to mean that the problem will not be resolved, and every financial shock will be "the next Great Depression unless we bail it out" until we've exhausted all avenues by which to delay. And specifically, I expect the Fed to wait as long as possible and do as little as possible in raising interest rates, just enough to pretend to care about inflation while keeping the markets happy.
It's about time that the Fed gives a bit of comfort to the 5-7% bruised market by saying that interest rate hike #1 is delayed for a few months. The market needs to know that they don't really care about inflation, only notionally.
We'll see what happens but I think you're much too negative. Both low interest rates and QE were directly caused by low inflation. As were other interest rate hikes before it caused by rising inflation. Central Banks being subservient to the market sounds more like a conspiracy theory than anything.
On January 23 2022 22:15 RvB wrote: We'll see what happens but I think you're much too negative. Both low interest rates and QE were directly caused by low inflation. As were other interest rate hikes before it caused by rising inflation. Central Banks being subservient to the market sounds more like a conspiracy theory than anything.
I'll certainly agree that the "Fed serves the markets" assertion is the hardest one to prove, in that they outwardly claim to be independent and respond to core financial indicators like inflation. But I've heard otherwise from people who actually work there (anecdotal), and looking closely at some of their recent decisions it's hard not to see it being consistent with a market-serving policy. They're certainly not supposed to do that based on the definition of what the Fed does that you would find in your average first-year college economics textbook, but that doesn't mean they don't do it.
Worth noting is that key indicators like inflation and unemployment are politically relevant and therefore manipulated for political gain. The people measuring these will exclude important sources of bad tidings by changing the calculation and often look the other way when the politically generated values don't seem very consistent with reality. In the US during the pandemic - they modified the unemployment measurement at a key time to get it below the "psychologically important" 1 million a week bound. And at a time when prices for things like food, gas, housing, healthcare, and semiconductors were going through the roof - well all that is mostly non-core inflation so it isn't real.
When the central bank in question only responds to manipulated signals and seems oblivious to the fact, you would be inclined to assume that they're either incompetent or lying about their intentions. Probably a little of both, but I guess we'll see when and how aggressively they do respond to an inflation that is now impossible to deny. I fully expect a token effort at best.
On January 25 2022 00:14 {CC}StealthBlue wrote: So what are the chances we see some circuit breaker action today? We are already past 1% drop and the markets just opened.
Unlikely. Most market action happens at open and close. If it doesn’t limit down at open it is unlikely to limit down later.
The one worthwhile investment is probably to own a property and not have to pay rent (disregarding places you wouldn't want to live in). Stocks these days seem like little more than a casino and are also treated as such (guilty of that myself) and most of the indices are made up of a handful of big companies, might as well buy those instead and save on a bit of fees.
I keep using greek gov bonds as a proxy for market stress lol. The correlation with stocks seems quite strong to me.
Regarding SP500 a counter rally seems likely from here. Not to be taken as advice etc.
Of all my purchases throughout 2021 - gold seems to be the best performing, lol. S&P500 erased about the last 6 months of gains in the past week and a half, so I suppose that's not rare. But perhaps a bit unluckier than average.
Foreign stocks seem to be getting hit harder than US all across the board. Doesn't seem based on anything more than a panic, so I might toss some money at those at prices that are less unsettling than 2021 ones.
On January 25 2022 01:35 LegalLord wrote: Of all my purchases throughout 2021 - gold seems to be the best performing, lol. S&P500 erased about the last 6 months of gains in the past week and a half, so I suppose that's not rare. But perhaps a bit unluckier than average.
Foreign stocks seem to be getting hit harder than US all across the board. Doesn't seem based on anything more than a panic, so I might toss some money at those at prices that are less unsettling than 2021 ones.
Yeah I'm quite happy with the performance of gold myself. Slow and steady as it should be. 'Goldsplosions' usually only appear when something goes awry.