What is reality?
Don’t worry, this isn’t some awkward transition into some new medical marijuana or psilocybin startup. I mean this very literally. How do we know what’s real?
That’s a question that’s going to get even more complicated when the “metaverse” takes off… and the metaverse is core to Facebook’s (FB) future plans.
And Facebook just shrugged off some damaging headlines to report better than expected third quarter earnings.
If you were following the news, you were probably expecting catastrophe for FB… but it gained both during the trading day and after-hours yesterday.
Let’s bring this question of reality even more down to earth. How do we determine value?
The whole point of the stock market, or markets generally, is to determine value so scarce resources can be directed towards satisfying people’s wants and needs.
That’s key… it’s something that’s determined subjectively. This can create a kind of funhouse effect when it comes to stock prices.
When you look at the stock market, especially “meme stocks” whose prices don’t seem to match reality, rethink how you look at reality.
Even if investors are “irrationally” sticking with “meme stocks” like GameStop (GME) or AMC (AMC), their thoughts and actions are creating an objective new reality that we all have to deal with.
“Mr. X” explains the strange new trading world that we’re in today, so don’t miss today’s column.
Of course, in the long run, fundamentals ultimately tell. You can’t keep an artificial illusion sustained forever. (Just ask the people who were involved in Enron or Theranos.)
But don’t ever underestimate the role of psychology in determining markets. After all, markets aren’t just about numbers and formulas.
They are about people – the wants and needs of everyday human beings. Perhaps most of all, markets are fundamentally about our dreams.
Now let’s get out there and realize ours.
Of course, in the long run, fundamentals ultimately tell. You can’t keep an artificial illusion sustained forever. (Just ask the people who were involved in Enron or Theranos.)
Keep moving,
In this episode Chris continues with his analysis of market conditions that are likely unfamiliar to most traders with less than 3 years of experience.
Let Chris help you take the guesswork out of your options trading with his clear explanations backed by 20 years of market experience.
Click Here to Watch Episode 44: “Head Fakes, Hedges, and Writing the Story of a Stock“
WORD ON THE STREET
Facebook Comeback, Twitter Fight, Trillion Dollar Tesla
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The Emperor Protects – Mark Zuckerberg is well known for his fascination with Augustus… but the last few weeks made it look like the Facebook Empire was well into its Decline and Fall. A blistering media campaign, fueled by internal dissent and government investigations, put FB on the defensive. Yet in the end, you can’t argue with the bottom line – and Facebook beat earnings expectations with $3.22 per share. An announcement that the company is adding $50 billion to its stock buyback program is also helping to keep the legions (shareholders) in line.
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Tesla (TSLA) Owns All – The last two years have taught us many things about life, death, and human nature. Above all, they have taught us one great truth – don’t short Tesla. After surging more than 12.6% yesterday, TSLA’s market cap has now surpassed one trillion dollars. Hertz’s order of 100,000 vehicles provided Elon Musk’s baby the momentum it needed to hit this remarkable milestone. “Wild $T1mes!” Musk tweeted.
Haters gonna hate
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Oligarchs Debate Inflation On Twitter – There was once a time when you would need big-time connections or even some kind of an intelligence service to know what the Great and the Good thought about economic matters. Now, they just argue about it on Twitter in front of everyone. Jack Dorsey of Twitter (TWTR) and Square (SQ) predicted that hyperinflation was already underway. However, Cathie Wood of Ark Investment Management said that inflation worries are overstated. “In 2008-09, when the Fed started qualitative easing, I thought that inflation would take off,” she tweeted yesterday. “I was wrong.” She said that “velocity – the rate at which money turns over per year – declined, taking away its inflationary sting” and that velocity is “still falling.” In response, Elon Musk tweeted that while he doesn’t know about the long term, “short-term we are seeing strong inflationary pressure.
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DOJ Wants A Bite Out Of Apple (AAPL) – New reports indicate that the Department of Justice is likely to sue Apple on antitrust grounds. The Information says that a “flurry” of activity is underway as the government is pressing the company’s business partners and is reportedly talking with critics. The key issue is likely to be Apple’s control over the App Store, the very subject which fueled a fierce legal battle with Epic Games. While Apple survived that suit, a DOJ challenge would be far more dire. AAPL fell slightly during yesterday’s trading day and in after-hours.
Did you miss Options Coach Chris Hood’s landmark event? Chris does a deep dive into his cornerstone strategy that has been paying him every week for years…
Click below to watch now.
EVERY WEEK, TRADE AFTER TRADE, WIN AFTER WIN
HOT SPOTS: What’s Going on in Geopolitics
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The Next French Revolution – In the upcoming French presidential race, everyone was essentially prepared for a strong challenge from the nationalist Marine Le Pen against incumbent Emmanuel Macron. However, it is Eric Zemmour, a television pundit known for his opposition to mass immigration, that is dominating the early stages of the campaign. Zemmour has not officially declared his candidacy, but if he does, it will fundamentally reshape the election and throw existing political coalitions into disarray.
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NBA’s Enes Kanter Attacks China, Nike – Enes Kanter of the Boston Celtics is continuing his public relations campaign against China’s authoritarian government. However, he’s not just targeting China, but the corporations that do business there. In a video posted to Twitter, Kanter said that Nike (NKE) “remains silent” about human rights issues, including “the oppression of minorities.” “Who makes your shoes in China?” he asked. “Do you even know?” It presents a major PR challenge to Nike, whose CEO said the company was a “brand of China and for China,” in June.
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Military Launches Coup In Sudan – Sudan’s military has detained Prime Minister Abdalla Hamdok and his wife as part of a seizure of power. General Abdel Fattah al-Burhan addressed the nation on television and said an “independent and fair representative government” would reign until new elections in 2023. Several governors were also removed as part of the coup. The UN has condemned the coup and several thousand people protested within the country, but it’s unclear any international power is willing to do anything to reverse the military’s actions.
CUTTING EDGE: What‘s Happening In Tech
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Earth Even More Unstable Than We Thought – Six years ago, a major 7.9 earthquake struck Japan. However, what has scientists fascinated today was a relatively minor quake that took place about 467 miles underneath the country soon afterward. While it was obviously too far down to do any damage, it still represents a major challenge to geologists. A new article in Geophysical Research Letters suggests that the quake was so deep it took place in the lower mantle, an area where many assumed quakes were literally impossible. If confirmed, some of the key premises of the discipline will have to be rethought.
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PayPal Backs Down From Pinterest Inc. Takeover – if you are going to launch a $40 billion takeover of another company, you should probably have some kind of a compelling rationale for shareholders. PayPal seems to have forgotten this lesson. Following a decline of more than 10% over the past few days, PayPal (PYPL) read the pulse of its shareholders and announced that it was “not pursuing an acquisition of Pinterest at this time.” While PYPL was up on the news, Pinterest (PINS) shed more than 12% on the news the deal was off.
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Blue Origin Plans Space Station – Blue Origin announced plans for “Orbital Reef,” a space station that will operate in “low Earth orbit.” “The station will open the next chapter of human space exploration and development by facilitating the growth of a vibrant ecosystem and business model for the future,” the company said. Translation – if you have the money, you can have a residential or commercial address in outer space. “The station will start operating in the second half of this decade,” the company confidently announced.
Blue Origin’s Vision Of Orbital Reef’s “Core Module” (Credit: Blue Origin)
FOR YOUR CONSIDERATION
“There’s also one pattern that I’m seeing repeatedly. When a “meme stock” takes off, it may retreat later… but it usually finds support at a much higher level than where it began.”
DWAC? PHUN? What? Few investment professionals had heard of these fringe companies before last week, let alone seeing them as investment targets.
However, because of their association with former president Donald Trump, these two stocks delivered huge short-term returns. Will they maintain their position like AMC and GameStop (GME) have been able to do? Mr. X breaks down the new trading environment.. and why you can learn to love the meme stocks.
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