1999 again?

[ValueArb]

This is my bubble tracking portfolio today.

 

https://app.photobucket.com/u/crandyhill2/p/7254206d-e5e3-497a-a14a-6827001e262a

 

I have one year puts against Tesla (200s and 400s), Nikola($7.50), Virgin Space ($7.50), and Plug Power ($10), so it sort of feels good when I see the entire board in red, but I kind of wish they would go up another 50% in the next few months so I can buy cheaper puts.

 

This is an experiment for me, first entry into options since Krispey Kreme days. What I'm finding out is that options are so costly that I'm underwater slightly on these positions even though they are all down since I put my positions on in the last few weeks. Huge spreads mean that an option might have a bid/ask of 0.40/0.60, and if you are forced to buy near 0.60 and the stock goes down, the options might jump to 0.45/0.65 and trade at .55 cents, giving you a 5 cent paper loss.

 

I'm starting to develop an appreciation for what the Big Short guys went through in 2007, when the defaults were rising but their positions were being marked down.

[RichardGibbons]

Yeah, one of my odd options things this year was the GME play.  At $320, I was bearish on the stock, but despite that, I sold Nov $5 puts for $1.03, just because the implied volatility was so high. That's pretty odd, making a bet that's bullish despite being extremely bearish on the stock, just because the details of options pricing made it seem like it made sense.

 

I closed it out about a week later for $0.59 after the stock fell to $100. Even today, with the stock at $40, the same puts are going for $0.60. The stock's down over 85%, only a few weeks have passed, but the puts have almost lost have their value (because implied volatility has been crushed.)

 

Options seem intuitive, but I find that my intuition about them is often wrong.  I think, in particular, it's harder to make money being long puts than my intuition says.

[ValueArb]

https://247wallst.com/autos/2021/02/19/tesla-gets-hit-with-horrible-dependability-rating-in-new-study/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+typepad%2FRyNm+%2824%2F7+Wall+St.%29

 

Tesla: Hey at least we ain't Alfa Romero, or Landrover, or Jaguar, they really stink!

[Xerxes]

Awesome interview with Grantham. Longer than the one on Bloomberg Front Row, and more interesting. The part about the comment people left for him after Front Row is pretty funny. For a value investor he has a good sense of humor, in fact i think funnier than Bloomstran's humour.

 

https://podcasts.apple.com/gb/podcast/jeremy-grantham-uncertain-crisis-invest-like-best-ep/id1154105909?i=1000477283884

[ValueArb]

https://thebearcave.substack.com/p/special-edition-will-ark-invest-blow

 

Interesting argument that ARK is poised for a collapse. If it did, it would bring a swath of my short positions down with it. Not sure the math works, but it looked like it was happening this morning fir the first couple hours of trading.

[Simba]

This market is nuts.

 

One segment of the market people are investing on p/s ratio and TAMs.. it's nuts .. eventually gravity will weigh on the overvalued and make the overvalued fairly valued

 

I still believe (and hope) that in the long run, the market is like a weighing machine--assessing the substance of a company.

 

Was that is? Did we hit the interim peak for 2021?

 

I guess ELON YOLO'ing on Bitcoin was the peak indicator.

 

SMH  :-\

[Gregmal]

There were a number of threads a year ago or so on the subject of Hertz, but I figured its worth revisiting. The main subject matter discussed here on COBF was the ridiculousness of Hertz being able to issue shares to retail investors while in bankruptcy. As was symptomatic of many things going on about a year ago, there was a tremendous arrogance with "the professionals", "the experts", etc. There was also this holier than thou attitude about how "immoral" and "unethical" it was. The underlying arrogance hinged upon a beyond a shadow of a doubt conviction that said preachers "knew" Hertz was worthless and retail investors knew nothing. And now it turns out that perhaps Hertz is going to be worth as much as $8 a share. And its just another reminder of how the experts and professionals dont know any better than the Robinhoods, despite the ruthlessness with which they mock and look down upon them. Arent the markets wonderful?

[TwoCitiesCapital]

2 hours ago, Gregmal said:

There were a number of threads a year ago or so on the subject of Hertz, but I figured its worth revisiting. The main subject matter discussed here on COBF was the ridiculousness of Hertz being able to issue shares to retail investors while in bankruptcy. As was symptomatic of many things going on about a year ago, there was a tremendous arrogance with "the professionals", "the experts", etc. There was also this holier than thou attitude about how "immoral" and "unethical" it was. The underlying arrogance hinged upon a beyond a shadow of a doubt conviction that said preachers "knew" Hertz was worthless and retail investors knew nothing. And now it turns out that perhaps Hertz is going to be worth as much as $8 a share. And its just another reminder of how the experts and professionals dont know any better than the Robinhoods, despite the ruthlessness with which they mock and look down upon them. Arent the markets wonderful?

I was one of those people and am still convinced Hertz would have been worthless in any normal recessionary scenario. The fact that the surviving auto rental companies were shedding cars at that time (and not buying them as they are now) AND the fact that Hertz was considering issuing shares at like $1.50 - $2.0 both very much supports that thesis. No way Hertz would have sol equity at $2 if they were confident they could get $8 at an auction. 

Process, not outcome, is what should be judged. I don't view this as being any different than people who bought GameStop at $100 or people who bought USO @ 150% of NAV thinking they were buying negatively priced oil. Both bets 'worked out' - but I don't think that means they were 'smart' or 'good investors'. They were gamblers who got lucky. 

We're simply in an environment where the Fed and the Treasury have agreed to support this type of malinvestment with trillions in direct stimuls, trillions in corporate subsidies, and interest rates at zero. I imagine for as long as that occurs, these types of bets may continue to pay off - but at some point they wont and someone will bear the losses. My guess is that it will be primarily people who believed that these were the "for sure" bets who didn't have a clue of the risks or potential likely outcomes to begin with. 

We all know gambling in a casino typically means you lose to the House. One guy winning by putting it all on black doesn't change my opinion of that. These examples don't change my opinion of the sophistication of the investors who made them or appropriateness of the trades. 

Edited May 12, 2021 by TwoCitiesCapital

[Gregmal]

The point is that the free markets are pretty awesome and that no one should be dictating to others what they can or cant do with their money. Ultimately, Robinhood was right about GME and right about HTZ. This fundamental issue, at least how I see it, is that the establishment, and elitists, are all fine and dandy with "free markets" their way. But then when they lose control they want to change the rules. Much like a casino operator once people figured out how to count cards. They are holier than thou but its an act because you cant be OK with gambling with asterisks when the asterisks are basically just conditions that allow you to prevent others from winning. "They" thought GME was worthless and then when others thought and wanted to buy it at $100 they said "no way". They "knew" HTZ was worth 0 and say "no"....and in both cases they were massively wrong. 

There doesnt need to be evidence it was a good or bad investment. Was there "evidence" TDOC was a good investment at $15 half a decade ago? Or Tesla at $40? At the end of the day people should be free to spend their money how they wish. A year ago you had no shortage of people lecturing from a pulpit about how everyone else needed to be doing things and the high majority of it has turned out to either be wrong, or at best, misguided. 

[RichardGibbons]

42 minutes ago, Gregmal said:

The point is that the free markets are pretty awesome and that no one should be dictating to others what they can or cant do with their money.

Yeah, I think this is a good point. The one proviso is that people shouldn't be bailed out when they make bad bets. So, if bailing someone out for a bad bet would become necessary in order to avoid an economic collapse, then there needs to be some rules in place to ensure that that sort of bet cannot be made.

[rkbabang]

No bet should be prohibited and no one should be bailed out.  It is the "free" part of "free market".  With freedom comes responsibility for your actions and the inability to control the choices of others.  Many people don't like that.

[CorpRaider]

We did that already bros.

[TwoCitiesCapital]

6 hours ago, RichardGibbons said:

Yeah, I think this is a good point. The one proviso is that people shouldn't be bailed out when they make bad bets. So, if bailing someone out for a bad bet would become necessary in order to avoid an economic collapse, then there needs to be some rules in place to ensure that that sort of bet cannot be made.

Pretty sure buying USO @ 150% of NAV and Hertz @ $1.00 were bets that were 'bailed out' by trillions in direct stimulus. 

Ultimately these guys made money. I didn't. I'm ok with that. But I don't think it means it was 'smart' or 'right' to do. They just got lucky.