Mom-and-pop investors are trouncing Wall Street pros

[Bullitt]

Take heed before listening to the pros. They are underperforming retail traders - badly. Not saying it's time to pile into UAL, SAVE, ZM, F, CCL, CHK, HTZ, but it's something to think about.

The Wall Street pros, who have consistently lagged behind the overall market since the last crisis in 12 years ago, now may find themselves lagging behind mom-and-pop investors by a whopping 16 percentage points, according to the Goldman's research.

https://www.marketwatch.com/story/a...l-st-pros-heres-what-theyre-buying-2020-06-15

I have to hand it to them - they bought heavily when sentiment was in the tank in late March. This site along with the Bogleheads (buy and hold only in a bull market) was pretty doom and gloom in late March. Even in the long term investing thread a few posters made claims that this time is different and that "it's not 2009 dude".

One thing the article doesn't delve into is the use of options by those looking for a big payout. If anything, it's not the market participation that's going to cause pain down the road, but the options craze. Options and leverage are toxic.

 

[Bullitt]

RE: Options.

Who's buying them all? Retail can't move the need like this image below from sentimentrader. I'm not sure what the implications are, but generally when everyone is on one side of the boat, it's time to move to the opposite side.

 

[James48843]

Wow.

That is telling.

I’m seriously thinking about moving to safety after seeing all the greed today.

I guess the question is- when the crash comes, will there be time to ease out, or will it all crash down in a day or two?


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[Bullitt]

I don't now.

TSLA opened 20% LOWER than it's all time high just 3 trading days ago - and it's still around 50% above its 200 DMA. I have to think that move washed out many weak hands that bought because "the split made the share cheaper", but whether that is a sign of underlying market weakness is hard to say.

With bond yields in the absolute crapper, it is possible that big money will be forced to move into higher yielding stocks such as utilities to help smooth out returns.

 

[rangerray]

I guess the question is- when the crash comes, will there be time to ease out, or will it all crash down in a day or two?

Do you think your answer is forthcoming? Buy the dip today?

 

[James48843]

Wow.

That is telling.

I’m seriously thinking about moving to safety after seeing all the greed today.

I guess the question is- when the crash comes, will there be time to ease out, or will it all crash down in a day or two?


Sent from my iPhone using TSP Talk Forums

I guess this answers my question.

(Sigh)

See- I get these flashes of insight exactly when all the rest of my fellow TSPTalkers snag those little important tidbits of information and share them here.

Now, if only I could get that damn crystal ball to work one more day in advance.....




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[Bullitt]

Anyone who was playing that options game indicated in the chart above probably got close to being completely wiped out yesterday.

The way it works is, you just keep rolling that accumulated leverage over into the next call option. The jig has been going long enough that it wouldn't take much for near total loss.

"No worries, I'll just get out of the market as soon as it gets too high." How many times have I heard that? Then, "you just have to buy back when prices are low." At least with college football starting up soon the handicappers will have some other ways to get their thrills.

 

[Bullitt]

Same guy as before, similar chart with long term perspective.

The plunge on Thursday and wobble on Friday wasn't enough to deter this activity - it fueled even more of it. There has been a gigantic, concerted effort across the gambling-addicted public to buy lottery tickets. That has helped propel underlying buying pressure. Once these options expire this month, there is a high likelihood that much of this buy-to-hedge activity has to be unwound.