Market Notes, 6th July 2020

What is money? (Part 2 of 94)

Listening to the Market Huddle from last week (episode #87), I got to hear from George Gammon, someone I’d never heard of. I’m not a great fan of hosts of podcasts all interviewing each other. However, he did make some good points, one of which was that whereas

Russell 2000

Vincent Deluard points out that the quoted P/E ratio on the Russell 2000 is essentially meaningless, here. It may even be negative, because losses incurred by constituents are simply ignored. It’s like me being allowed to ignore all my losing trades in working out my performance to date. I have known this for a long time, but the index keeps marching up. I know, I know, nobody wants to invest in firms that make profits in today’s market, so this should have been expected. Well, if something cannot go on forever it will stop. But maybe not for a really, really long time.

Mad Markets

$TSLA went up 15% today. It’s a blatant fraud. The market is truly mad. However, it’s not for us to question why, it’s just for us to buy and buy (puts, if need be). I have no idea why a company that which will never make a profit or pay a dividend can be worth anything, but that’s why Dave Portnoy is rich and I am poor. Anyway, Fed go Brrrr is making everything go up, and also vols go up. Kuppy & Patrick Cerezna have an interesting discussion on why vols are going up, but the conclusion they come to is that it’s the right time to sell vol and go long, by writing puts on small cap stocks you don’t mind being exercised into. Kuppy talked about PG&E ($PGEUU), but there are more. I favour the “Incredible Hulks” set, that I originally learned about from Kuppy. You can have a look at it here. What is worth noting is that some of these are trading at a P/E (for the next twelve months, projected) of 2.0. Going short in this market is going to lose you money, so buying a stock which is so cheap might be the way to go (this is not trading advice).

If you are really feeling like taking some risk, why not buy some other fraud stocks. For example, $NIO went up 23% today. No, it doesn’t have any P so I can’t give you a P/E ratio.

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