Yahoo!!
Posted on Sunday, December 13th, 2020
I had a very interesting moment this week. I needed to go the local grocery store as Diane wanted me to get two items. In and out. I forgot my mask. You would think that I had committed some heinous crime. The compliance with masks in Publix is about 102%. I could feel the eyes burning into me. People were horrified. The thing that they don’t know is that I already had it and am immune for the time being. Anyway, I then went to Home Depot and wore my mask to help other people feel safe. I was approached by a family of five not wearing masks. I was horrified. Wait a second bud! That might be a tad hypocritical and quite frankly a little crazy. I saw and felt both sides of the mask issue in the span of an hour. This whole thing is driving me crazy. Enough already. Let’s turn the page to 2021.
The CNN Fear and Greed Index has fallen from 89 last week to a more palatable 76 but that is still in the Extreme Greed category. The small investor is still pumping up the popular stocks as they day trade with leverage in the options market. Saw a stat this week that said trades at online brokers are up 200% year over year!! During the Dot Com day trading era they were only up 80% year over year.
Robin Hood is a recent addition to those online brokers as it was the first to offer free trading. How do they make money? They sell your order to the highest bidder. Yes. Your order has value and is bought and sold. Robin Hood orders are especially valuable because their customers tend to use options and that order flow can be easy money for traders. I dug down a bit more in depth on Robin Hood this week and it is structured much like social media. You gets cool sounds and reminders to take a look and trade some more. In case you were wondering what people were doing as they work from home. The fun will end at some point just like in 1999.
…they (Robin Hood founders) cleverly built their firm around attracting the type of account that would be most desirable to their Wall Street trading-firm clients. What kind of traders make the most saleable chum for giant sharks? Those who chase volatile momentum stocks, caring little about the size of spreads, and those who speculate with options. So Robinhood’s app was designed to appeal to the video-game generation of young, inexperienced investors. – Forbes
Tesla may be the highlight this week as it goes into the S&P 500. Apparently, about $70 billion worth of Tesla will need to be bought by funds that follow the S&P 500. Traders have been anticipating this event for months. It will be fun for an old floor trader to watch the action on Friday. The last time we saw a company this large to go into the S&P 500 was 1999 and the company was Yahoo. That stock hit its all time high the next month and never approached that level again. Could this be an indicator of a top? It could be for Tesla.
There is an options expiration on Friday which may unlock the market from its recent range. The chance of a solid move lower (or at least increased volatility) is the highest it has been in some time. If we get a move lower I don’t think it will last long. Markets are expensive but have had time to digest recent gains and the central bank support will not end in 2021. In fact, it may increase.
Stay safe.
I think we aspire less to foresee the future and more to be a great contingency planner… you can respond very fast to what’s happening because you thought through all the possibilities, – Lloyd Blankfein
A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty. – Winston Churchill
To learn more about us and Blackthorn Asset Management LLC visit our website at www.BlackthornAsset.com .
Disclosure: This blog is informational and is not a recommendation to buy or sell anything. If you are thinking about investing consider the risk. Everyone’s financial situation is different. Consult your financial advisor.