Is There A Disconnect Between The Reality and The Stock Market?

Investing can be fun, but it can also be bloody scary. I guess it all comes down to your temperament when bad things hit the fan. For example, I notice that I tend to sell a stock too early. By selling a stock too early, I had experienced missing out on huge gains. Also, whenever I get greedy in playing stock options, I would get slaughtered. Sometimes, the stock I invest in heavily would go way down. I tend to get slaughter when I buy puts of stock in thinking that stock would go down.

2020 is the year in which I think the stock market is acting incredibly weird. Out of nowhere, the COVID-19 pandemic spreads throughout the globe, causing the weirdness of the stock market to go on steroids. For example, in March of 2020, everything was going way down. In November of 2020, everything seems to be skyrocketed and unstoppable. Now, in December, somehow, I feel the stock market is somewhat sluggish. Still, the weirdness has yet to go away because I notice that a lot of retail investors push the valuation of newly minted SPACs out of proportion. For example, QuantumScape won’t produce solid-state batteries until 2024, and yet the market cap for this company is now above 20 billion dollars.

I feel like we’re revisiting 1999 when the Dot-com bubble burst. Nonetheless, this time I think it’s somewhat different since many SPACs are trying to merge with private companies that do have decent revenues. There always will be exceptions, and Nikola is one of these exceptions. Nikola has yet to produce a functional vehicle for the mass, but the retail investors at one point pushed Nikola stock over the moon. In September of 2020, a short seller known as Hindenburg Research targeted Nikola with a ghastly bashing report and got Nikola’s founder, Trevor Milton, fired. Nikola stock is now plunging steadily down.

As we speak, the interest rates are all-time low, the gold price is way high (around $1,800 plus), and the COVID-19 pandemic is still raging. President Trump is about to step down to allow president elected Biden to take over the administration in 2021. The dollar is slipping in strength. Unemployment is way high! Parts of the United States are in a lockdown state so people could have a social distance to fight the pandemic. Vaccines that could take on the COVID-19 pandemic is about to roll out soon. Things seem to be in limbo, and it could get worse. Somehow, the stock market is shooting way up! Is there a disconnect?

In the video right after the break, Deadnsyde Youtuber mentions that MicroStrategy’s stock price plunged so hard in 1999 might had been the reason that the Dot-com bubble popped in the first place. The surging of unfounded stock valuations of today’s stocks could also be the catalyst in which it may take only one over-valuated, well known stock such as Tesla to pop that could lead the bubble of today’s stock market to pop hard.

What do you think?

United States’ Stock Market Plunged Triple Digits In Past Two Days, Fears Are In The Driver Seat

I don’t play stock anymore, because I’m suck at it.  United States’ stock market plunged a thousand points, more or less, since last Friday and this Monday, and the whole market looks incredibly shaky now.  Nonetheless, I remembered how we complained the market was so unregulated in 2008 or so in which contributed to subprime crisis that spilled into the whole market, but now we are complaining that the market is being controlled by China which may contribute to the plunging of stock markets around the world.  I’m wondering, which method is the correct method to let the market runs wild?

If you have followed the news, China’s stock market has been hammered very badly by selling, and so people suggest that the fear in China’s stock market has spread to the United States and elsewhere.  This certainly has some truth, I think.  After all, if people invest in China as the stock market there is plunging, it’s understandable that they may sell in the United States to recover some physical assets such as Dollar.  Nonetheless, this may not be true since nobody would know how China’s stock market gone wrong would really affect the United States.  It’s curious to me to see China’s stock market is affecting the United States’ stock market too.

There is another argument which proposes that China’s Yuan devaluation contributes to the stock market plunge in the United States, because United States’ corporations and companies would be less competitive in China, elsewhere, and at home, thus contributing to the selling of shares in the United States’ stock market.  Nonetheless, nobody would know how much fear would be driven by Yuan devaluation.  Thus, it is curious to me to see people are selling shares in the United States as China devalued Yuan down to 4%, more or less.

Of course, people may think Yuan devaluation would not allow the FED to raise interest rate, and so it would be super bad to see the FED may raise interest rate.  I think this may have some effects on how people manage their shares in the United States’ stock market.  Nonetheless, the general public isn’t too sure about when the FED would raise interest rate, but the FED had said that they want to raise interest rate.  Perhaps I’m missing on reading several news articles or so, because I didn’t see the FED had come out to calm the stock market down in term of relieving the fear of interest rate raising.

The stock markets around the world are evermore interconnected somehow, and I don’t really know how one country’s stock market could affect another, but I guess it’s all about the economic conditions that drive the fears, speculations, and so on.  We are living in an interesting decade as not only economic conditions are the fears but we also have around the world, small scale conflicts that may spill into much bigger conflicts kind of fear.  Furthermore, we have oil prices which has plunged below $40 per barrel.  The near term outlooks of the stock market and world economy are not really that optimistic.  I guess we will see more actions coming soon in coming days.

Something Suspicious Within The Circle Of High Frequency Traders Prompted Authorities To Seek Secret Computer Codes And Algorithms

Years up to 1929 and short while afterward, pools of wealthy investors joined up secretly to drive up prices of stocks so they could reap the most money from the market.  The reverse could be done so certain stocks could be horde to sell at higher prices later.  Rules and regulations came into play when the authorities figured out the game, and that were enough to effectively stop such practices.

Nowadays, stock market seems to be even more volatile even though we still inherit the rules and regulations of the pasts.  Everything electronic has drove stock market to lose points sharply as if the game is rigged, therefore not every investor is confident that the market isn’t rigged.  Story such as “U.S. Regulators Seek High-Frequency Traders’ Secret Computer Codes” isn’t boosting confidence of many investors, but the truth has to be sought out nonetheless.

Hopefully, the link which points to the story above won’t be a smoke of a fire to come that will destroy the confidence of investors, especially now since the economy isn’t stable at all.  If there is a fire though, the truth has to be told so people can avoid being burned by a rigged market.  Scary isn’t it?

Basically, Huffingtonpost reports that Financial Industry Regulatory Authority requested secret computer codes and algorithms from high-frequency traders for an investigation that is underway.  Securities and Exchange Commission is also on the case.  The authorities don’t want investors to be alarmed since nothing suspicious has yet been found, but the investigators want to make sure the market isn’t rigged, I guess.

Source:  http://www.huffingtonpost.com/2011/09/01/us-regulators-traders-computers-secrets_n_945897.html