Reading your post made me go watch the speech Kennedy gave the night MLK was shot. Just listening to the crowd react when he breaks the news to them is deveststing.
Dow futures up over 2%. Most cruise ships and airlines up over 10%.
Equity markets are so volatile that no single day movement, up or down, on any given day should surprise anyone.
Looks like it is up another 25% in AH trading. Lol.
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Looks like we’re all gonna be ok guys. Rational market figuring out it overreacted yesterday.
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Scratch that, rational market having a change of heart.
All the smart investors bought the dip last night, got out at +700 today, and are buying the dip again.
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First two parts are right. Not sure about the third one. I think there’s a lot of room downward that this could fall.
If I am sure of one thing in this world it is that Tesla shorts will eventually be rewarded.
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TSLA shorts right now after reading this:
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I’m gonna need some TA triangles before I feel comfortable with this.
Barstool pivoting from sports betting to STONKS really putting that rational markets theory to the test.
The Hertz thing is legitimately insane. A company is going to sell stock while in bankruptcy, i.e. they are selling something that has absolutely no value. Efficient markets indeed.
I mean there’s a non-zero chance that they don’t liquidate all of the shares, right? My understanding, which is not very deep, is that in Chapter 11 it’s possible that the shares stay above $0.00 and you re-emerge with some non-zero value if they’re able to restructure and continue doing business. It’s also possible that they are forced to liquidate the shares to pay debts, and that when they restructure and re-issue shares you have nothing.
One friend wanted to take a flier on them, and compared them to American Airlines. I talked him out of it. But this is why it would trade at like 50 cents per share instead of going to 0.
This article said that previously something like 2/120 companies had returned to their value of 1-year prior or higher after going through Chapter 11. AAL was worth about $30 a year ago, so 1/60th of that is .50. If you think some sort of government intervention or bailout or favorable deal for a corporation is more likely now than it was 10 years ago, maybe it’s worth a little more. 50 to 60 cents seems reasonable to me. Obviously the people buying it at $1, $2, $5, etc were massive suckers.
DJIA now slightly negative for the day. About 4 hours ago, it was +800.
Hertz bonds are trading at 40 cents on the dollar. The equity is a lock to get wiped out.
Interesting tweet here from someone who I know of via 2p2 and the golf world. There was a really good golf thread of a guy who was like almost good enough to get on some of the tours, had caddied for some guys who made it, and took a run at it once I think. He knew a guy who did like golf analytics for some pros… I started following that guy on Twitter cause sometimes he tweets out analysis of a hole or two that the pros are playing in a given week, and I think it’s really cool.
No clue how good he is at trading or whether he’s anything other than a total fish at stocks, but he is at least a data-driven thinker. He tweeted this today…
https://twitter.com/scottfawcett/status/1271428282576240640
Essentially his theory is that the after-hours and pre-market trading sessions have much lower volume and thus prices can be manipulated much easier. Those prices dictate opening prices, so it creates an opportunity for massive investors to pump and dump the entire market.
This sort of lines up with something I’ve been wondering about, which is when we hit the point where our 1%ers are so rich that they can pump and dump the entire stock market without even using their outsized political influence. Like if the market cap of the S&P is $28 trillion, and the top 1% of Americans own $25 trillion in wealth (the number as of 2018), can’t they just move the market at will? Like if even half of their wealth is in the S&P 500, and they all sell 10% of it, the market goes down 5%.
In theory, their selling and buying would be dollar-cost averaged over the drop and climb, thus amounting to about nothing… But if doing so triggers a couple trillion in stimulus, they have something to gain out of it. Also if doing so triggers the Average Joe to panic and bail at the bottom, they get to buy more at the bottom than they sold at the peak. Last, but most importantly, they could make a killing with options.
Even if this is impossible now, I think the concept is sound. There will come a point in late-stage capitalism when the top 1% has so much wealth that it can move the stock market at will.
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American Airlines bonds traded at 15 cents on the dollar when they went through bankruptcy. The equity has a 98% or higher chance of getting wiped out, but there is a small chance it does not. I don’t know if that chance is 1 in 500 or 1 in 50, but there’s a chance.
A gambling event is occurring.
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Here’s more on this… (LOL Cramer, but still.)
Strictly speaking, a 60% haircut on the bonds only means that the equity has at least a ~60% chance of getting wiped out. Generally speaking, the more volatile values are generally, the worse it is for the value of debt relative to equity. And it’s pretty volatile out there…
EDIT: More concretely, assume that the BK process ends up with an auction of the business to whoever wants to buy it. (Not sure if that is actually part of the plan or what, but it’s a good model.) If the auction price is basically known, then you can just take the proceeds, run them through the seniority of claims, and come up with an a value for all the securities. However, if there’s a range of possible outcomes with the same mean value, that variance shifts value from more senior claims to more junior claims, since the former eat the downside and the latter get the upside.