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Episode 142: Traders of the Lost $ARKK (Patreon)

Published:
2021-03-08 03:38:32
Edited:
2024-03-04 16:19:38
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Content

We investigate the insane rise of Cathie Wood’s infamous ARK ETF and her increasingly large illiquid holdings. Then fan fave Alexandra Scaggs returns to walk us through all the funnies happening in the bond and repo markets, how much congress loves the banks and finally answer: Is Mr Market About To Have A Sad?

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Comments

Kevin Diez

This rules

John

boZ scaggs

PrinceVocalFry

The ark is the central object of early Jewish history. It's mentioned often in several books

Vincent Utah

Me: “Oh boy, I finally have the time and cash to finish my degree.” COVID: “Haha no, fuck you!” Mr. Market: *breaks out whip and handcuffs* “Bend over, son! This is what you get for having hopes and dreams...”

Frank Cold

What the heck is disruptive innovation?

senorjefe

Do Chamath next.

Laura

you assholes, i’m trying to go to sleep. love y’all 🖤

Baron

Glad you got back Girlboss Skaggs on the pod

J P 3

The market has a family resemblance to the dotcom era. Growth stocks have gone on a ridiculous run. Valuations get stretched. Then interest rates start to rise, and prices start to fall quickly. On the other hand, value stocks have been doing well lately. I think during the dotcom era something like $5 trillion was wiped out. Rising interest rates though have feedback effects in other markets (including foreign debt markets, the housing market, corporate debt), so who knows where things go in the next few months or years.

Brendan Garcia

I think “too big to fail” refers to the company or institution being “too big to BE ALLOWED to fail.” Meaning it will always be bailed out by the federal government in the end, and therefore it can act pretty much however the fuck it wants.

Hume An

Was that Liz or Charlie Munger talking? It’s premature to say that ARK is junk. Yes, 21% down from last month is bad, but it’s one month. They’re still up 145% from last year and 547% from five years ago. They had a bigger dip of ~36% from Feb to March last year and then had incredible growth from April on. I share your concerns about the size of their fund and the impact ARK is having on its small cap holdings, but I need more than one bad month to write them off.

Lulu

I have a disability and a self-driving car would be amazing but I'm never buying a Tesla. Pleeassee do an ep on Tesla and Elon

SMO

Scaggsys back!

Dan Z

why is it called finance when you fine-in money and fine-out you're broke?

AKorgar
>>55141298

"Disruption" is corporate jargon for some kind of new business model or gimmick which destabilizes an already established market, allegedly leading to innovation or "progress" and huge profits for the business introducing it. So like, Lyft or Uber is a "disruption" of traditional car services/taxi companies.

Fellow Worker

I didn’t understand a fuckin word of this but it sounded very smart

Scott Gregory

brace i heard you namedrop the franco-british union in an earlier ep and must ask a personal question: how many hours of HOI have you presently logged? thank you

A S

Wall Street and Silicon Valley need theme songs. You know, like "Hooray for Hollywood"

A

when I was a demented Christian teen boy I would open the Bible randomly when I was troubled so god could show me what I needed to hear- but it always just opened to the spots I visited the most and were creased

A

Only play the hits

orc

TSBS (Top Shot Backed Security)

will michel

finance gf confused conspiracy theorist bf

firstname lastname

The discussion on selling puts toward the end kind of misses the mark for me. There isn't anything innately wrong with selling puts as part of a defined strategy for retail investors. This strategy is most commonly utilized as one half of "The Wheel," where you sell puts until you get assigned, then sell covered calls against those shares you just got assigned on. Unless the stock totally eats shit or you do something dumb like selling a call that you then get assigned on at a price lower than your breakeven price, it's actually fairly hard to lose money doing this if you manage your position sizes responsibly. Yeah, you can blow up your account selling options, but people on WSB blow up their accounts with long positions all the time too. Most options being sold to retail investors are being sold by market makers and not other retail investors anyway. This is evidenced by the bid-ask spread on options and how it's extremely difficult to sell an option, particularly an illiquid one, at the ask, but you'll instantly get filled nearly without exception by selling at the bid. I could be wrong about this, but I think an inverse gamma squeeze is less likely than the opposite scenario because the maximum loss from being short puts is bounded by the underlying going to zero, and if the company is sound (not TSLA heheheh) the shares will have value regardless of options-related fuckery on the stock price. The inverse relationship is less true because it's hard to justify TSLA being $895/share and having an $860 billion market cap or whatever it had a few weeks ago no matter how Musk-brained you are. When short calls, your potential loss is theoretically infinite if you're not properly covered (i.e. the stonk goes up forever and you are forced to buy shares for $69,420 that you then have to sell at the strike price the call was sold at). This is thought to be at least part of what happened with GME, since short stock and options positions don't have to be reported to the SEC, whereas long positions (like holding puts) do. Melvin or maybe even a market maker like Citadel may have sold calls on GME without having the shares to cover because the float was low, it was so overshorted, and the probability of the squeeze was such an outlier. As the price mooned they were forced to close out their naked calls at a massive loss or buy shares at an inflated price (possibly even higher than the strikes of the calls they sold) to cover. The highest strike calls available prior to the week it memed to the moon were like $45, and new ones started getting opened up as it climbed higher and higher until it reached the point now where the highest strike is $800. Selling a put on the other hand is akin to getting paid to put in a limit buy order for 100 shares. Say there's a stock trading at $12/share and I want to buy it at $10/share. If I'm fine with owning the stock even if it goes under $10, I can sell a $10 strike put and get some cash for it immediately. Maybe like 50 bucks total for the contract if it's got a few weeks on it. If the expiration date of the put rolls around and the underlying is trading above the strike price, nothing happens. Shares don't change hands and the option expires worthless. If the underlying goes up, say to $15, prior to the expiration date, I could even buy the put back for less than I sold it for (say $25) and pocket the difference ($50-$25 = $25) as profit. Because I got $50 for selling the put, my breakeven on buying those 100 shares at $10 each at expiration is $9.50 per share, so if the price of the underlying closes between $9.50 and $10 on expiration day, I'm not technically losing anything from taking ownership of those shares at that point, though it could potentially go down further. sorry for being such a fuckin nerd. someone kill me please

William Pepper

My boy just lost 5k on ARKK but he’s loving TrueAnon now. Brand new listener and a 2016 Trumper

uya

“Are you familiar with this thot?” Lmao

TrueAnonPod
>>55188685

there is nothing wrong with selling puts what I take issue with is RH allowing puts *to be sold* collateralized by equities that are traded on margin

firstname lastname
>>55188685

That's more of a Robinhood specific issue than anything though. It's all part of the larger problem that became super apparent during the GME fiasco where Robinhood just signs people up for margin accounts by default without really even making it clear that that's what they're doing, or asking enough questions to ensure that the people they're giving margin to have the capital or know-how to manage their accounts if things happen to go sideways edit: Like I've never RH so I don't know how they determine options level suitability for their account holders, but with normal brokerages you can't sell puts without the full amount of cash held as collateral unless you have the highest level of options approval (level 4 or 5)

TrueAnonPod
>>55188685

yes this is exactly why I was speaking about robinhood specifically. and to your point about robinhood and margin, yes this is what we explained in the GME episode, not sure if you listened to that.

TrueAnonPod
>>55188685

"but with normal brokerages you can't sell puts without the full amount of cash held as collateral unless you have the highest level of options approval (level 4 or 5)" — yes. this is exactly my point and what I said on the podcast. if you do not have the cash in your account to cover the shares when you sell a put contract, robinhood shifts your equity purchases *from cash to margin* to collateralize the contract.

firstname lastname
>>55188685

I'm more taking issue with what Liz said about how "there's a massive massive number of people" selling puts on margin without knowing it. Like I just don't think that's true at all lol

firstname lastname
>>55188685

"if you do not have the cash in your account to cover the shares when you sell a put contract, robinhood shifts your equity purchases *from cash to margin* to collateralize the contract. " ok but the root issue here is that the contract is even allowed to be sold in the first place in that scenario, not really the fact that it gets sold and then the shift from cash to margin occurs

TrueAnonPod
>>55188685

hi I am liz. anyone selling puts on robinhood is doing so in margin without knowing it. robinhood is a massive platform, and the vol in options is so large (and increasingly so) that there are macro consequences to what happens on retail platforms (particularly in the options market), robinhood being the patient zero here. and yes, I agree, as I said on the podcast, that the issue is the contract is allowed to be sold in the first place and its getting around that by collateralizing it on margin.

firstname lastname
>>55188685

Robinhood's website says "It’s helpful to note that Robinhood doesn’t allow selling uncovered options, because there's no limit to the amount of money you could lose with some strategies." so is this not true? are you saying that if I were to open an RH account right now with $5000 in cash and spend it all on stock, that I would then be able to write a put on margin because they would collateralize the contract with my shares?

TrueAnonPod
>>55188685

yep robinhoods website says that but after doing research ive found that there is a lot of anecdotal evidence that this is not the case, and not how they are actually operating, which I'm sure shouldn't come as too much of a surprise. but i don't encourage you to try it for yourself ha! xx have a good one

Eamon

Please tell me you guys read the poorly written Daily Beast article about Dirtbag Left being Fash LMAO

Tron Quip

Nice. You guys should definitely infinitely hypothecate the pod via the old London trade. It's a doozy.

Tugmny

🌈🐻

Daniel Woods
>>55194767

It was so front loaded with boogaloo that by the time I finished reading it I joined several NoFap forums and bought a Hawaiian shirt. The center really wants NazBols to happen.

npc

Liz: Did you go to school for finance? I wish I could understand half of what you discussed — I’ve really tried to understand markets through books/the Internet but past a certain point I am in la la land.

Ian

Noah, a lot of the terminology and acronyms is intentionally complex to make the powers that be seem smarter and dissuade people from looking too deep under the hood of what's going on. Finance is complex, but the words used to describe it often are more complex than they need to be.

Monty Tenderson

I really like these market episodes. Looking forward to the Tesla/Neurolink/SpaceX episode.

Ian

Love the finance episodes. There's so much interesting dirt to dig up in this system. 'Financialization' of every aspect of our lives is very much underway. It reminds me of the Davos episode where y'all talked about putting price tags on everything: fresh water, condors, blades of grass etc.

boop

there's a whole "decentralized finance" phenomenon in crypto which is probably not far away from making it's own MBS/CDO equivalent

Horse Badorties

Hahaha thanks very much for this epi. I be holdin' and was wondering wtf was going on. Huge volume today, CW might become a Satanist after all this.

Timothy Massar

Can you all have another crossover ep. with my other fav caster Michael Judge from Death is just around the corner? Spidernetwork was my shit, I want more of you all mixing words together ❤

David J Carter
>>55176889

When I was incarcerated by court order in a Salvation Army barracks I would roll the Fundi Christian equivalent of the I Ching and open the Bible to a random Chapter and Verse. I would always land on the book of Leviticus - the law of priests with its instructions on the required method of dove and pigeon sacrifice. Having been indoctrinated with the doctrine of the inerrancy of scripture I took the book at its word and that is why I am even now not allowed to own a gun or be in close proximity to any pet or domesticated animal.

BoYeV

Um, sir this is a casino. But f’real thanks for talking about goings on with Stonks! Please be advised: they do go down. Also “Undefined risk on the upside” is like my catchphrase now

Julian

Liz, your ma’am splaining is incredibly hot.

yerrak

Please.... I am on my knees BEGGING for a Tesla episode....

Jack Montoro

You guys need to do an episode about the Portuguese Carnation Revolution and why the communists did not end up taking power there

jack dulworth

Cathie is bullish as hell on Palantir lmao. P sure over $250 million in PLTR stock

John Burke

Please do a Tesla episode so I can get my friends who take insults towards Elon personally to be normal again

Dan Greene

A word of advice on the finance eps: it would help us ignoramuses if Liz and Alex would play dumb and explain some of the jargon. I got maybe 50% of it, the other half I nodded and said "huh" Love the show

Martin Kasey

Wish Brace would stop pretending to know what Liz is talking about and ask her to explain

Mondodome

All this Royals BS calls for a Megan Markle ep. Why does Liz hate her?

DH
>>55202775

That's how I feel. Often when reading finance articles I have to trawl through like, 10 Investopedia articles. But once I finally understand what it's saying you realize the processes these complex terms are describing are actually pretty simple.

Varjon

please do an elon/musk family ep. also im gay.

Gunnar Hansen

I really love when you cover financy things, no shade to Karl, but modern finance is *incredibly* hard to understand in terms of linen cloths + labor = coat + surplus value. You're doing Karls work here Liz!

Timothy Dugan

what happened to the ability to download the episodes? there used to be a link for the mp3

James

Episodes like this is the reason there should be a finance channel in the discord. Just sayin.

gnot_paul
>>55194767

TrueAnon should do an episode on Alex Reid Ross. There's some material there worth discussing.

James
>>55415799

Also, a while back I read an article on how citi was pitching synthetic CDO’s again

Zach Denzer

So am I going to lose all my money soon if I don't take it out of my bank or not?

Carmen W.

liz, pls pls pls start a finance podcast

Dan

Liz, if you start a financial podcast I will back the hell out of it.

auntsizzle

Liz I don't feel 100% comfortable sinking my life savings into NFT tech without your insight.

Ed O'Brien

this seems related , deli doing 35k in sales market cap at over 100 million : https://www-cnbc-com.cdn.ampproject.org/c/s/www.cnbc.com/amp/2021/04/15/theres-a-single-new-jersey-deli-doing-35000-in-sales-valued-at-100-million-in-the-stock-market.html

Ethan Hunt

What are your thoughts on this post? https://old.reddit.com/r/GME/comments/m4c0p4/citadel_has_no_clothes/ This user has a number of other related effortposts.

Usufruct Squad

This episode should really get a Tesla tag too

Patrick Burke

I’m reporting from the future, April 14 2022. Crypto and NFTs have totally collapsed, and TrueAnon was right!