Fear? That’s the other guy’s problem
January 29, 2021
–On Tuesday I wrote this in my missive “There is likely intense lobbying of the Fed to institute some macroprudential tools in the quest to save markets, under the guise of saving Robinhood traders from themselves, when in reality it’s some of the professionals that are close to being carried out. But the latter group owns the lobbying machinery.” They didn’t get to Powell, who averted his gaze while saying “think of the unemployed.” They did though, get to the brokerage houses, which are now tripping all over themselves trying to reverse trading restrictions that have alienated their customer base. In the dotcom run up, Greenspan acknowledged that there would be inevitable fall out. But he said he didn’t think it was the Fed’s job to interfere in the decisions of millions of individual investors.
–Are these new investors not a major component of the entire bull run? Maybe they decide en masse that yes, the game IS rigged and it’s better to just go back to sports betting. Portnoy is advising followers to HOLD. Admirable in a way. But compare that to the famous short seller Carson Block of Muddy Waters. He cut his positions on the realization that the reddit crowd is targeting short sellers, saying “there are no medals for valor in this business.” It’s a tactical decision: though his positions might be ‘right’ he’ll sit this dangerous dance out. With an avalanche of zealous new regulations coming in, maybe a lot more investors take to the sidelines.
–Rates rose yesterday as stocks staged a recovery, with tens up 4.2 bps to 105.3. A few large trades re-focused attention on the downside. An exit seller of 30k TYH 138c at 10. Buyer of 30k TYJ 137/136p 1×2 for 4/64 and 3/64 credit covered 136-165, and a later buyer of 20k TYJ 136/135p 1×2 flat vs 136-055. Currently the 1x2s have call deltas, but open interest is quickly starting to build in April options.
–It’s not always a friendly business. As Louis Winthorpe III said to Billy Ray Valentine, “Fear? That’s the other guy’s problem. Nothing you have ever experienced will prepare you for the absolute carnage you ae about to witness. Super Bowl, World Series – they don’t know what pressure is. In this building, it’s either kill or be killed. You make no friends in the pits and you take no prisoners. One minute you’re up half a million in soybeans and next, boom, your kids don’t go to college and they’ve repossessed your Bentley. Are you with me?”
