Just for fun - purely for entertainment - checking on these melt-up trades since this post,
- ASHR: join the China rally. 22% one year return.
- EEM: join the emerging markets rally, overlaps with China. 25% one year return.
- SSO: leveraged S&P 500 index, not a bad vehicle actually. 47% one year return.
- XIV/SVXY: bet on declining volatility. 186% one year return.
I think all of these will benefit from a market melt-up. Personally I think the S&P 500 index is ground zero for the equity mania, so if I wanted to play a melt-up, I'd probably use SSO or XIV (which are 1st and 2nd order derivatives of the S&P 500).
Great links, thanks.For the interested - here's the related Rational Reminder from Ben and Cameron on the topic of "money printing". Just a bit longer and explained with more nuances.
I watched the PWL videos. His main argument is that central bank stimulus doesn't cause inflation, though he does talk about how it boosts asset prices. He says that the central bank is not the main factor behind stock market gains, though.For the interested - here's the related Rational Reminder from Ben and Cameron on the topic of "money printing". Just a bit longer and explained with more nuances.
Thing is, analysts have known for quite a few years that the Federal Reserve "drives" the S&P 500 index. BMO had a research paper on this back in something like 2012. This new study further supports that theory. This one also shows that the Federal Reserve skews towards making asset prices go up. They respond strongly to drops in stocks, but the reverse is much weaker. They take actions that stimulate the market higher, on average.When it comes to explaining the amazing stocks rally, which continues as the world is ravaged by a miserable economy and a pandemic that refuses to be extinguished, Putnins was able to confirm that the Fed has had a lot to do with it (although not everything).
This something very interesting that I haven't been able to figure out. What is their strategy with this call buying frenzy? Are the LEAPs or short term options? With billions of dollars in investable funds, do they still need leverage?There's a growing belief that for the last few months, institutions have used options to manipulate the market and drive this crazy rally
Options Traders Whipped Up Stock Boom With SoftBank Buying
Analysts believe that aggressive call buyers, like at Softbank, pushed the market higher with outlandish call positions -- 10s of billions $ of pure call options, without disclosures. This resulted in a feedback loop and more general buying.
If this is true than you should NOT want to join this rally as it means it's not based on fundamentals, or even on investor sentiment.