Monday, September 14, 2020

What is With the Stock Market?

This is my own slightly more than amateur opinion (although my portfolio gained $15K today!)

The overall direction of the market has been up for several months now,  with occasional stomach turning drops.  What is going on?

The people who manage mutual funds with many hundreds of billions of dollars collectively have decided that Trump is going to splatter Slow Joe Adams likely being a lot odd Republicans with him into Congress.  The first couple years of the Trump Presidency will repeat with a rapidly growing economy, so they are buying on the expectation of a post- election boom. 

The periodic busts agree because a lot of stock trading is actually algorithmic trading: Programs that look for certain levels of individual stock prices and general market and index levels.   Back in the 1990s, after my employer was bought by DSC, I kept a spreadsheet on the window of my office showing the daily transaction data Ann's graphs of the DSC stock price.   There was a deformed, irregular sine wave caused by this algorithmic trading.  The stock varied between about $4 and$49 per share during the period I was exercising my stock options. At the same time, I was using my very half-baked guesses about how these algorithms worked to buy and sell.  Each transaction was not hugely profitable; I was only buying or selling 500 or 1000 shares daily,  but I did get a pretty good feel for how the DSC stock responded to the algorithmic trading.   I finally stopped because I was paying short-term capital gain tax on the profit.  A $3000 profit meant less than $2000 net taxes and not every transaction made a profit.   The risks involved for a person not a millionaire just did not make sense.   But if you read Wolfe's Bonfire of the Vanities, you will recognize why it was stroking my sense of being He-Man Master of Rohnert Park (or at least, my block).

In any case,  it appears big money managers are expecting a Trump  victory.  You do not get to the point of managing billions by making careless decisions (except letting your wife find out about your mistress).

Part of why I do not think this is a leftist billionaire (are there many who are not?) Pump and dump is that the risk of getting burnt if anyone figured out that the dump was about to happen.  Also, mutual fund managers would buy the temporary bargains up and crush the dump part.

4 comments:

James Gibson said...

My brother was of a mind a year ago that if Trump failed to be re-elected the economy would go into a tail spin. His basis was the fact that in the three years since Obama the economy and the markets had increased by twice as much. Before Covid, January of this year my IRA from my Boeing years had reached $450K. Under Obama in 2014 when I turned it over to Edward Jones it was worth $335K. In two years to Obama leaving office it had only gone up $15K in value: At the end of 2017 it had risen $30K to nearly $400K.

My account at Chase is doing the same though its the account I live off of so its just stable:: making what I spend. In less than two years I can start drawing on the Ira and in nine years I am fully vested in Social Security. All I had to do is leave Cali where by now the cost of living would have drained the Chase account. The main point is, if the Dems win do they slaughter the markets in the name of their Antifa members or try and keep things going for everyone else. A Trump win is more to business liking.

JLW III said...

I have commented elsewhere that I have a sick feeling that the tech oligarchs and the other usual suspects like Soros and Warren Buffet are involved in a pump and dump to create a black swan, October surprise, market crash just before the election. Look out and keep some cash around.

Clayton Cramer said...

Then they would lose tens of billions of dollars. I don't think they are that willing to sacrifice.

JLW III said...

In a pump and dump the dumpers get out before the crash.