I Am A Moron. I Am Shorting Stocks & Losing Big Money: Famous Trader/ Investor

Discussion in 'Must-Read Interviews, Articles & News Items' started by Arjun, Jun 22, 2020.

  1. Arjun

    Arjun Chief Executive Officer (CEO) Staff Member

    Mar 19, 2015
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    Relentless rally baffles intelligentsia

    The relentless rally in the stock markets since Mid-May has baffled everyone.

    Jim Cramer pithily described it as the "endless rally".

    Jeremy Grantham called it a "rally without precedent".

    None of the luminaries such as Warren Buffett, Stanley Druckenmiller, David Tepper, Howard Marks etc have participated in the rally.

    In fact, Stanley Druckenmiller admitted that he missed the rally completely and is feeling "humbled".

    It’s a terrible gut-wrenching scenario - so I shorted the entire stock market

    Wolf Richter, a famous investor/ trader on Wall Street, did what any sensible investor would do in the present circumstances.

    He noted that the “greatest 50-day rally in history” of the S&P 500 index skyrocketing 47% from the lows has come at a time when the entire World is going the worst economic and corporate crisis imaginable.

    "But stocks just kept surging even as millions of people lost their jobs each week. The more gut-wrenching the unemployment-insurance data, the more stocks soared".

    So, he short-sold the S&P500 ETF (SPY) thinking that the rally would end and he would pocket hefty gains.

    Unfortunately, the move may have backfired badly because the relentless rally may have caused him to book massive MTM losses.

    He pointed out that the otherwise inexplicable frenzy is caused by the policies of the Federal Reserve.

    "The Fed did it. And everyone was going along for the ride. Don’t fight the Fed. Spreading $2.3 trillion around in one month and $2.8 trillion in three months – in addition to whatever other central banks globally were spreading around – was an unprecedented event. And the fireworks probably surprised even the Fed."

    He also pointed out that present day "day-trader frenzy" is worse that the crazy dotcom bubble in late 1999 and early 2000.

    "But back in 1999, the economy was strong. Now this is the worst economy of my lifetime," he said.

    "I’m sharing this trade for your future entertainment so you can hail me as the obliterating moron that infamously shorted the greatest rally floating weightlessly ever higher above the worst economic and corporate crisis imaginable," he added, with a wry smile on his face.

    Are 'Zombie Investors' fuelling the stock-market bubble?

    According to a story in BI, inexperienced 'zombie investors' may be fueling the stock-market bubble by buying stocks aggressively.

    They are blindly buying anything and everything that is listed - including bankrupt companies like Hertz.

    "The situation has gotten so silly in the stock market that the shares of bankrupt Hertz [HTZ] – which will likely become worthless in the restructuring as creditors will end up getting the company – were skyrocketing from something like $0.40 a share on May 26 to $6.28 intraday on June 8, which may well go down in history as the craziest moment of the crazy rally," Wolf Richter has stated.

    The BI story warns that even the Fed won't be able to prevent another 30% crash in the stock market.
    Last edited: Jun 22, 2020