SoftBank Unmasked As 'Nasdaq Whale' That Stoked Tech Rally (cnbc.com) 82
An anonymous reader quotes a report from CNBC: Japan's SoftBank was reportedly the "Nasdaq whale," that bought billions of dollars in individual stock options in big tech companies over the past month, driving up volumes and contributing to a trading frenzy. Softbank declined comment on a Financial Times story that quoted unnamed sources who said it was buying equity derivatives on a massive scale. Rumors had circulated in the market that there were large players behind the frenzied activity in the options market for big tech and internet stocks, and SoftBank was one named mentioned in connection with extreme volumes in some out-of-the-money calls.
According to the Wall Street Journal, SoftBank had made regulatory filings showing it bought nearly $4 billion in shares of Amazon, Microsoft, and Netflix, plus a stake in Tesla. The paper quoted a source saying that SoftBank spent roughly $4 billion buying call options tied to its stock holdings, but also in other names. It then could profit from the run up in stocks and subsequently unload its position to other parties. SoftBank was trading in names that are among the key drivers of the stock market. Apple, Amazon , Microsoft, Facebook and Google equal about a quarter of the S&P 500, and they have been drivers of a big chunk of its gains. One options trader explained that those names can be proxies for the market, and can be hedged against the S&P 500 and vice versa. The options market activity was credited by analysts for adding froth to the stock market itself. Some of that is now reversing.
According to the Wall Street Journal, SoftBank had made regulatory filings showing it bought nearly $4 billion in shares of Amazon, Microsoft, and Netflix, plus a stake in Tesla. The paper quoted a source saying that SoftBank spent roughly $4 billion buying call options tied to its stock holdings, but also in other names. It then could profit from the run up in stocks and subsequently unload its position to other parties. SoftBank was trading in names that are among the key drivers of the stock market. Apple, Amazon , Microsoft, Facebook and Google equal about a quarter of the S&P 500, and they have been drivers of a big chunk of its gains. One options trader explained that those names can be proxies for the market, and can be hedged against the S&P 500 and vice versa. The options market activity was credited by analysts for adding froth to the stock market itself. Some of that is now reversing.
Tesla (Score:1, Troll)
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I don't think it was either of those, but just good old fashioned momentum.
Except there is no evidence that "momentum" actually exists in stock prices. Humans are good at seeing patterns when there is none.
If momentum actually existed as a real and measurable phenomenon, it would be easy to profit by arbitraging against it.
Re: Tesla (Score:3)
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It really depends on what you mean by "momentum."
"Momentum" in stock pricing means that a stock that has recently risen is more likely to continue to rise than a stock that has not recently risen.
Question: Is this an actual phenomenon?
Answer: No.
Re: Tesla (Score:3)
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It's a real phenomenon - it goes by the name "herd mentality."
Plenty of fallacies have names. That doesn't make them true.
Based on "herd mentality" what do you think the stock market is going close at on Tuesday? In a week? In a year? In a decade?
You have no greater chance of being accurate than a monkey throwing darts. If you did, you would be out enjoying your yacht with your sugar babies, not posting on Slashdot.
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"You have no greater chance of being accurate than a monkey throwing darts."
That's not true. The stock market rises on average. The expected value of the market on Tuesday, in a week, in a year, in a decade, can be calculated. Everyone who buys stocks *does* profit from this, including basically everyone with a pension or retirement savings.
What you can't (usually) do more accurately than a monkey throwing darts is predict more accurately than that. They call it "outperforming the market".
If you bet any ran
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i do not think anyone is suggesting that "herd mentality" is some magic predictive theory, like a gambling system that makes you more likely to win in a casino game. But equally, the concept is not a fallacy just because it fails to provide god-like powers.
Re: Tesla (Score:4, Funny)
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It's also known as the "Greater Fool Theory,"
GFT only works if you can predict the top of the market better then everyone else. Guess what? You can't.
If TSLA is higher a year from now, "momentum" advocates will use that as proof that they were right.
If TSLA is lower a year from now, the same people will say that is proof that "momentum" had carried it too high back in 2020 and it finally corrected.
If your theory can explain anything but predict nothing, then it is worthless.
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If you're just saying Momentum and GFT buying are not a sound basis for investing, then I agree. Nonetheless, I think that the theory of Momentum buying is worth quite a bit since it (non-predicatively) explains one way that markets remain irrational longer than Tesla shorters can remain solvent. So the useful takeaway is to discount price indications from these irrational actors and focus on value-investing fundamentals, or your knowledge that the world will run out of cobalt in 3 years, or whatever .
But
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So the useful takeaway is to discount price indications from these irrational actors
Nope. The useful takeaway is to buy index funds because no other strategy based on public information has any advantage and index funds have lower transaction fees.
or your knowledge that the world will run out of cobalt in 3 years
If you have non-public information, then sure, you can make money on that.
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Re:Tesla (Score:5, Interesting)
The run up in Tesla stock was due to their forward thinking around electric generation. storage and cars and results of Tesla's execution, not some sort of market manipulation.
No. First, to move Tesla stock like it has takes BILLIONS. Individual investors did not do that.
Everything you think you know about the stock market is wrong. Everything I was taught is now wrong. Benjamin Graham's teachings no longer apply. If you followed his teachings, then Tesla is extremely over-valued. From an accounting perspective, it is impossible for it to ever become profitable enough to warrant its current stock price. Even at $200/share it would be a stretch. If you own Tesla, SELL! You can always buy it back again and if my GUESS is correct, you could buy it back for less than $200 in the near future.
Anyway, back in the day, companies were valued based upon the strengths of their balance sheets, the management, and a guess of future prospects - and it IS a guess because no one can tell the future - based on REASONABLE projections and ROI. One could - using Graham's techniques - just about always make money in the stock market. Warren Buffet built his career on them. Now, they do not work - even for Buffet. He has abandoned it. So what happened?
Sovereign funds like Softbank and the Saudis with way too much money to invest wisely. They have so much they just throw it at anything regardless of merit. And they have distorted the market.
Money managers - the ones that manage 401Ks bailed months ago. But after seeing those dipshits at Softbank jack shit up, THEY went back in so they wouldn't miss out on further gains. I heard the same thing back in 1999.
When funds go back into the market just because it is going up - regardless of underlying economic and company fundamentals - there's a crash coming. Oh, Softbank has shit for brains. Their deal with WeWork was the most retarded thing I have yet to see in my 40 years in this game.
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I was just trolling dude. TSLA is worth more than the top 3 car makers combined and has only sold 900,000 cars and barely has any revenue growth. LOL. The whole thing is a massive joke.
Totally agree. And there the term "Troll" is a shit term invented by one of the founders of this site. Regardless of your intentions, you raised an important point.
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Re: Tesla (Score:2)
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Amazon had positive cash flows. It just was reinvesting all its profit into building out infrastructure. Does Tesla have similar cashflows?
No, it does not. But what about its first annual profit [cnn.com] you ask?
The only reason Tesla had a "profit" is because it sold carbon-emission tax credits [forbes.com] (and didn't follow GAAP).
David Rocker, a retired hedge-fund manager, is not a Tesla bull. “It simply boggles the mind that the most valuable auto company in the market has to resort to these accounting games to even show any profit,” Rocker told the Journal.
Morningstar concluded that Tesla would have lost money without the tax credits. According to its analyst David Whiston, “We calculate Tesla had a pretax loss of $278 million excluding $428 million of regulatory credit revenue.”
Re: Tesla (Score:1)
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Sovereign funds like Softbank and the Saudis with way too much money to invest wisely. They have so much they just throw it at anything regardless of merit. And they have distorted the market.
central banks distorted the market by buying a large percentage of assets with infinite money, everyone else is just along for the ride
P/E ratio is a myth (Score:2, Informative)
Everything you think you know about the stock market is wrong. Everything I was taught is now wrong. Benjamin Graham's teachings no longer apply. If you followed his teachings, then Tesla is extremely over-valued. From an accounting perspective, it is impossible for it to ever become profitable enough to warrant its current stock price. Even at $200/share it would be a stretch. If you own Tesla, SELL! You can always buy it back again and if my GUESS is correct, you could buy it back for less than $200 in the near future.
The problem with the price-earnings ratio is that it doesn't measure anything concrete - it's just an indicator of the psychology of people purchasing the stock.
The P/E ratio has no units, and no scale for comparison. There is no way to calculate the "right" P/E ratio for a company, no way to tell whether the ratio is too high (or too low) except by consensus, and the consensus is calculated largely by people who don't show their work. It's like inflation in that regard.
In terms of information theory, P/E r
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What the fuck are you talking about? P/E is literally Share Price divided by Earnings per Share. It is currently around 700x but you can calculate it yourself.
As far as I can see, he contradicts neither of your two claims. So what about them?
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Re:P/E ratio is a myth (Score:5, Interesting)
The problem with Tesla is that a) the industry isn't well defined, and b) it doesn't really match any other company.
That is 100% incorrect.
Tesla is a car company and should be valued as such. And even IF it were a new industry, accounting standards like ROI still apply. And the rest of your comment is completely and utter horseshit.
I stand by my argument.
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Tesla is a car company and should be valued as such.
Maybe you should take the 30 seconds or so required to find out that Tesla is rather more than a 'car company.'
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Tesla is a car company and should be valued as such.
Maybe you should take the 30 seconds or so required to find out that Tesla is rather more than a 'car company.'
Really? It's hobby of solar? Or it's hobby of PowerWall or whatever? Really?
Learn about WHAT drives Tesla's revenues! Learn about their cash flows. Learn about their cost structure.
Then and only then, you can have a conversation with me. Now shut the fuck up you ignorant Musk sycophant. This is why I HATE social media - people like you.
Spare me your nonsense because as far as I am concerned, you are one of his many PR people who lie to boost his reputation - which is ALL lies. Musk is a fraud. And I k
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Tesla is at least a car company plus a fuel station chain. It's got a bit of fuel producer and distributor in it too.
If you're overly enthusiastic you take the values of those four industries, throw in the roofing and electricity generating industries, multiply by a software company's typical P/E and come to the conclusion that Tesla is amazingly undervalued.
In reality the amount most people spend on gas is on the same order as the price of an economy car, and a major selling point for electrics is that the
Re: P/E ratio is a myth (Score:2)
Read their 10-K, they are definitely not just a car company.
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I've never understood this. Do you get some satisfaction from making an "argument" that is just an unsupported statement?
Re: Tesla (Score:2)
Then again, SoftBank lost its shirt with WeWork, what's little market manipulation to help recoup some of the losses?
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That's some heavy duty trolling you're doing there, next thing you'll be telling us something crazy like Apple made money by selling phones.
Whales (Score:4, Insightful)
Re:Whales (Score:5, Insightful)
Ban derivative trading, do trades by auction in human sensible blocks of time, have immediate electronic settlement and no stock borrowing.
Re:Whales (Score:4, Informative)
Ban derivative trading
All that accomplishes is moving the trades and the jobs that trading creates, outside your jurisdiction.
Most trades (by volume at least) already occur in private dark pools.
Dark pools [wikipedia.org]
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The reach of the US government is world wide when it sets its mind to it, trade with the US and interaction with the US financial system is important. Traders are just self-important.
If the trade in those dark pools become plain illegal, don't expect much money to circulate in them. You'd have to white wash the trade with above the table trading. Don't underestimate the power of government.
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The reach of the US government is world wide when it sets its mind to it
American influence is dwindling. An attempt to impose American law on foreign stock markets will make it dwindle much faster.
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Easy enough to fix, criminalize it
Singapore and Shanghai will welcome the ex-American financial industry with open arms.
The capitalization of the Singapore stock exchange has doubled in the last decade. Shanghai's has gone up eight-fold.
The NYSE has lost 30%.
If smoke is slipping through your fingers, the solution is not to squeeze harder.
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The NYSE didn't shrink because companies listed there moved to the Singapore or Shanghai exchanges. It shrunk because of LBOs and other privatizations.
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It would be trivial to insist that all trading of US stocks take place within US jurisdiction. I'm not suggesting that it's wise, but possible. If every trade (and owner) was registered via a government agency (like a land deed) and tied back to a public auction, it would be technically trivial to do.
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High frequency trading should be banned / prevented / disabled
Most trades already occur outside the public markets. More regulation will just accelerate the departure.
Then you can use your twisted pair copper to trade fairly against the big guys.
You seem to have a weird mental model of how you think stock exchanges work.
Do you really think that individual traders log into the NYSE's computers and trade stocks?
Re: Whales (Score:2)
And a fixed sales tax on every trade. Say 5%. That will kill off the high frequency traders, and force people to think longer term, investing instead of speculating.
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Why fix it? (Score:2)
It is never good when a large entity can move the needle on the entire market.
Why is it bad though? Did you personally buy or sell stock during that time? If not, it didn't really matter.
The market is supposed to be about owning stocks which represent shares of companies. It is not supposed to be Las Vegas on steroids.
It still is for the vast majority of stock. Just stay away from stocks with crazy swings or overly irrational investors.
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The S&P and DOW are not the entire market. Not even close. The S&P, which tracks 500 companies, had a blip of almost 1%. The DOW, which tracks 30 (badly), maybe moved by the same amount.
Finance journalism does hype like nobody else.
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I think you missed the part about softbank swinging the entire market, enough so that the vast majority of shareholders were affected.
I think you missed MY point, if you didn't sell then, how were you affected? I own a lot of stock, I was not affected at all.
There are a whole lot of stocks not moved by the actions of SoftBank as well.
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Why? Softbank made a tiny little blip in the value of a handful of stocks, which made a somewhat tinier blip in the value of some averages of mostly those stocks. The "entire market" didn't notice. Maybe Softbank made some money by suckering in some fellow market gamblers, maybe not.
Actual investors took a look at stories like this, checked their stocks on graphs appropriately zoomed out to show multiple years, yawned, and went back to ignoring the whole thing.
Call this by its name, momentum ignition (Score:2)
Lets not be pussy about it, this is clearly momentum ignition.
Of course even if everyone stops being cowards and names this, the "rules" prohibiting momentum ignition have such a huge amount of mealy mouthed hedging I don't see them getting censured for this.
LOL, the stock 'market' (Score:2)
LOL, the stock 'market' is a whirlpool of bullshit and nanosecond-based cheating.
If you want to see how thoroughly the stock market has been subverted, the read "The Flash Boys", by Michael Lewis. You'll be so pissed off after the first few chapters that you'll never put another dime in the stock market.
It's COMPLETELY subverted and rigged beyond ANY doubt, any at all. And the best part is that it was all done 'legally', according to the rules the cheaters at the top came up with.
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Stock market fiddles and hyped-up stocks are not a new thing. I recently read the history of the South Sea Bubble (ca 1720). There was barely any underlying trading value, but people bought into the scam, including the English government. Some people got very rich out of this, but not the investors or the people of England.
We still need a system for genuine trading companies to raise finance to grow their businesses, but the current system of selling stocks in an open market encourages a gambling mentality,
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Stock market fiddles and hyped-up stocks are not a new thing.
For sure, but this has been taken to a new level that most people wouldn't believe was either legal or possible.
Dark money pools and obfuscated micro-second trading mean that no ordinary Joe will make money in the stock market except by accident, when his trades happen to align with some mega-money-manager fund's moves. In short, the odds are worse than Vegas where at least you have a chance.
Seriously, read The Flash Boys and then decide if you ever want to put another nickel in the stock market. My guess i
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This is very much my attitude. I call the stuff you describe "funny money". That is where you make money by selling money, rather than investing in some business that does something useful and makes a profit. Though I do not invest in stocks directly, I know that any money that I have accumulated is invested on my behalf, by banks and pension funds. I have to trust that these institutions that hold my money do not fall into to the traps set by the so-called "masters of the universe".
Hang on sloopy (Score:3)
Very interesting (Score:1)
Now find out who is feeding SoftBank... Chances are you will find it goes all the way to the fed's quantitative bullshit.
The entire stock market is bogus right now. It is being made into foie gras
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Just free Saudi money.
There's not as much of that around as there used to be. The pandemic and resulting soft oil market have hit them hard. They need to conserve cash to maintain their subsidized economy.
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Same difference... It's all "petrol-dollars"
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Nothing to do with the Fed. Just free Saudi money.
The Central Planning committee has, so far, used $7.5 trillion (yes, with a 't') to prop up this market. Money is being used to buy corporate bonds [businessinsider.com], many of them junk bonds, because banks are, once again, too inept to do their job and need socialism to keep going.
"The problem with official intervention in markets is you're no longer letting the market determine prices. So what is the right valuation?" Vincent Reinhart, chief economist at Mellon, said, adding "the possibility that the Fed will broaden the scope of its interventions" is even affecting prices in sectors ineligible for Fed lending.
If you think the Fed has nothing to do with this overbought market, kindly explain why every single time the Fed says it will continue to use its socialist policies, or even add new ones, the market goes up [businessinsider.com].
While the central bank never directly aimed to boost the stock market, its actions have sent a clear signal to investors worried of rising default rates and closed-off credit lines, Seema Shah, chief strategist at Principal Global Investors, said in an interview. By consistently providing monetary aid, investors see the bank living up to its promise to act "forcefully" in keeping the economy afloat.
"They have, in some ways, set up a backstop," Shah said. "For example, if you feel like there are significant strains building up in one important segment of the market, at this stage it's fair for a lot of market participants to expect the Fed to intervene in that part."
So yes, the market manipulation by the Ce
Makes no sense (Score:2)
Buying calls does not facilitate that activity. You can't buy call options "tied" to long positions. The writer is clueless.
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Buying call options can drive a stock higher. If I buy calls in stock I already own to drive the stock higher, I might be able to then sell the shares for more than the cost of the options that pushed the momentum trading that raised the price.
If done as a strategy, it's also illegal as fuck.
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https://seekingalpha.com/insta... [seekingalpha.com]
Son's hail mary to recover from horrible mistakes (Score:4, Interesting)
Simple answer (Score:1)
that much fed into the market will get someone scratching their, thinking must be something here
then others do the same thing and that is the pump
then Company#1 cashes in and BOOM, another so called crash
that is is how Wall Street works, it is all an illusion in the Big Money Club and
like George Carlin said -- You aren't in the club!
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They bought high and the market tanked. They needed prices to be higher in order to get out without losing money.
So, they bought a metric boatload of call options.
Call options are a promise to be able to buy a particular stock at a particular price on some future day (expiration). The banks that sell them don't really mind buyers that pick up a few here and a few there. But, if lots of them are sold, then the banks end up in a large, risky position. On the expiration day, they might have to buy a boatload o
The important question here... (Score:2)
don't know (Score:1)