Business & Investment

Weekly Roundup, January 25, 2021

Today’s weekly Roundup begins with a focus on changing the nature of personal investment.

Personal investment

The economist pointed it out Everyone has become an option trader..

  • The amount of options in the United States increased by 50% in 2020 to about 30 million contracts per day.
  • In 2021, it will be operating at 40 million units per day.

Much of this extra volume comes from the little investors looking for Leverage..

Featured stocks such as Tesla and Apple have 57 types of contracts. Tesla Call, which expires on Friday, January 15, was available every $ 5. There were about 27,000 contracts with an exercise price of $ 1,000 (Tesla’s share price was about $ 860).

This type of call option is favored by a new cohort of retail investors due to its very low cost and near expiration date. It has the characteristics of long-probability sports betting.

On the other side of the deal are institutional investors, large traders and hedge funds.

[They] We are happy to receive premiums from option buyers and manage the risk of occasional large losses if the Panther bet is rewarded. One of the hedging of call options is simply to own the stock. As a result, long-only equity funds are increasingly being drawn into the market to generate returns.


Sometimes this doesn’t work Last week’s GameStop (GME) – Reported in The Verge.

  • Trading was suspended on the day as the stock price rose 70%.

Shares have already risen 250% this year, and Reddit board r / wallstreetbets retailers have begun buying after short-selling Citron announced its bet.

The hype generated by r / wallstreetbets helped create what is known as a “short squeeze”. The problem with short circuits is that the loss is theoretically infinite.If stocks start to rise, some short sellers abandon shorts and buy and return stocks at higher prices [to flat]..

This will increase your inventory and burn out any other shorts left in your inventory. Some of them choose to cover their shorts.

GME shorted 138%.

Citron said he would not comment on GameStop because of “the angry mob who owns this stock.” Andrew Left, editor of Citron Research, wrote that the backlash included criminal activity to be reported to the Securities and Exchange Commission.

This is an interesting development. Are Shorters afraid to be released? If so, how do you lower the stock price?

Brent Donnelly

On Epsilon theory, Brent Donnelly considered new media for retail investors. Off Wall Street and Off Off Wall Street..

Off Wall Street Off

Here is a map of his territory. The new source is green and the really wild ones are yellow.

  • I still use economists, FTs and Bloomberg, but it’s not as good as it used to be.
  • FinTwit is the only green source I use.
  • I’m also a 14 year veteran of Reddit, but r / wallstreebets isn’t the subreddit I’m following.
  • I’ve never bravely confronted TikTok.

Brent says there are four reasons why you need to worry about his charts.

  1. Twitter and Reddit have interesting and unique analyzes that you won’t find anywhere else.
  2. When retailers open new accounts and gamble on stimulus checks, rocket fuel drives a hilarious, crazy move under a single name. [See Gamestop]
  3. Retail is an important driver of the bull market / bubble in financial assets.
  4. pleasant!

I agree with all but the last one-it was fun before, but the caliber of contributors has plummeted over the last five years, especially since the blockade began.

  • There is still a lot of useful information out there, but there is no longer much benefit in discussing the issue with those who oppose it.
dividend

Imogentu

In FT Adviser, ImogenTew warned: UK dividends are unlikely to return to pre-pandemic levels until 2025...

  • Pandemic has removed eight years of growth dividend, In total dividend It will decrease 44% to £ 61.9bn in 2020.

Two-thirds of companies reduced or canceled dividend payments in 2020.

  • 40 percent of the cuts came from the financial sector as the BoE relied on banks and insurance companies to stop them dividend..

Crude oil prices plunged, causing another 20% in crude oil inventories.

  • Shell cut dividends for the first time since World War II, and BP halved dividends.

In addition, the government said companies using the covid support scheme should not send money to shareholders.

  • FTSE-100 payments were lower than SME payments (35% reduction compared to 56%).
  • Defense sector like hHealthcare, consumer basics, and food worked best.

David Smith, portfolio manager at Henderson High Income Trust, remained optimistic.

This year’s market has a strong pocket for dividend growth.
Selective investor. Although revenues in 2020 were terrible, the dividend yield in the UK market is 3.1%, which remains attractive.

That’s why Simon Young, Manager of the AXA Framlington UK Equity Income Fund:

We are optimistic about the future of British companies. British companies have shown great resilience, pragmaticism, and often ingenuity, primarily in dealing with fast-moving viruses that require changes in government policy with little or no notice. We expect dividend growth of 5-10% this year.

I think this is called speaking your book.

Property

Economists Long-term revenue from property We use data from four Oxbridge University donations.

Every year, only a small part of the house changes hands. They may not represent changes in overall inventory and therefore housing assets.

In contrast, this time:

The authors of the study collected detailed data on sales and purchases (from the transaction ledger), and rent and maintenance costs (from the rent book) over the period 1901-1983.

They tracked the rent of individual properties, created a cash flow-based index of total yields, and deducted maintenance costs to reach net yields.

  • The real rate of return on residential real estate is 2.3% per annum, which is a fairly low level.

Perhaps the Oxbridge sample does not represent the revenue that could have been achieved. Frankly, the university may have had a duff portfolio (or a particularly bad tenant).

But the study is likely to be correct:

The portfolio was well diversified by region and type and was managed with a focus on long-term returns.

UK top-down housing data prior to the 1970s are neither mixed nor quality adjusted. What looks like a rise in prices or real rents may simply be an improvement in quality.

So real estate wasn’t a big investment, even before the pandemic.

Marcus invests

Goldman Sachs Announces Marcus Invest platform It will be launched in the UK in the second half of 2021.

  • The service is currently being tested by GS Insider and will be launched in the United States in the first quarter of 2009.

David Solomon, Chairman and Chief Executive Officer of Goldman Sachs, said:

I’m particularly excited about the launch of Marcus Invest platform, This brings Goldman Sachs investment expertise directly to the masses for the first time
Wealthy customers.

Marcus Invest provides individuals with just 1,000 investment capacities
Our proprietary dollar Assets Allocation strategies with options from index funds to ESG-focused ones ETF..

Digital investment capabilities are integrated into the Marcus app and website, combining Marcus accessibility, simplicity and transparency with our key investment advisory capabilities.

This sounds different ETFSince it is a base robo-advisor, all charges are charged.

  • Employee Beta uses a 0.15% “special offer” annual fee (probably above) ETF Fee).
  • It will make the service a market leader in the UK, but it doesn’t count our chickens.

There are three investment options / strategies in beta, but there is no information about what they are.

  • Also, there are no details about whether tax accounts (ISA and SIPP) will be offered.
Bitcoin

Before we go, let’s take a quick look at Bitcoin news.

Ruffer details the move to BTC.

Our portfolio has a history of using unconventional protection.This is another example, a small assignment to an idiosyncratic constitution. Assets The classes we think of bring something very different to our portfolio.

Because of zero Interest The investment world is anxious for new safe havens and uncorrelated assets. We think this is relatively early, at the foot of the long-standing trend of institutional adoption and monetization of Bitcoin.

Think of Bitcoin’s bad reputation as a risk premium. As we go through the process of normalization, regulation and institutionalization, this premium compression can have a dramatic impact on prices.

This seems to me one of the possible consequences, but I’m having a hard time calculating the probability.


FT is Fund manager reaction to FCA ban About crypto derivatives for individual investors:

HANetf’s Hector McNeil said:

By the FCA’s decision, retail investors will basically be able to significantly increase abuse, fraud and error from regulated products on regulated exchanges, from regulated environments, unregulated markets and market infrastructure. Up to, it was pushed to the wild west, which underlies the crypto market.

Townsend Lansing of Coinshares said:

FCA initiatives rarely interfere with digital Assets Although generally adopted, it poses a significant disadvantage to UK investors.

Digital assets are certainly innovative, but we believe that wrapping them in exchange-traded fund products is a normal extension of the industry’s unique ability to provide access to exchange-traded funds for various underlying assets. I have.

Adrian Welan of Brown Brothers Harriman said:

Currently, there is cognitive dissonance in the field of cryptocurrency regulation.

Meanwhile, regulators are moving swiftly to implement legislation and a strong regulatory foundation for crypto investment, while at the same time taking enforcement action and banning some corners of the crypto market.


in the meantime, Federico Manicardi and John Normande of JP Morgan questioned Bitcoin’s ability to act as a diversification of the crisis..

They called BTC:

The most unreliable hedge during periods of severe market stress. Mainstreaming reduces the diversification effect and leads to poor performance in times of crisis.


And Business Insider Fear of “double payment”:

Bitcoin fell 11% on Thursday after a report from BitMEX Research suggested that a serious flaw called “double payment” had occurred on the Bitcoin blockchain.

Double payment is a highly feared scenario where a user can use Bitcoin multiple times. In the end, the double payment event didn’t actually happen, according to the CTO of Bitfinex.

Quick link

There are seven this week, but the first five are from economists.

  1. The newspaper Chip manufacturing has been redesigned
  2. And that The battle for chips has entered a new stage
  3. And wondered Banks now have too much cash
  4. And Invited a Tesla bull to discuss a Tesla bear
  5. And Online sales boom is killing supermarket profits..
  6. Musings on Markets made its second data update in 2021. Risk compensation
  7. And from the archive – prompted by a podcast – flirting with the model Liquidity cascade..

Until next time.

Weekly Roundup, January 25, 2021

https://the7circles.uk/weekly-roundup-25th-january-2021/ Weekly Roundup, January 25, 2021

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