Eye on the Markets: Coronavirus Stocks/Investments thread

ejd_5277

EOG Dedicated
#1
There was some stock market-related stuff popping up in the MLB talk, and I figured it was worth its own thread. There are some smart guys here whose opinions I would certainly listen to.

I took some big broad-based ETF short positions at the close on April 6th, when the Dow posted a 1,600 point gain. I figured the rally off the lows was nothing more than an extended period of short covering given how far things had fallen and how quickly.

Boy, was I wrong.

To say I can't figure out why the market is behaving as it is is an understatement to say the least. It roars forward on any small piece of good news, and just shrugs off (or even rallies on) initial jobless claims numbers literally 10x worse than ever seen in history. Sure, a drop like we had off the February highs by definition prices in a ton of bad data going forward. No matter how much stimulus the Fed puts out there though, you just can't do as much damage to the consumer as is being done here and expect some kind of V-shaped recovery. This is going to take a decade to fully recover from IMO. We haven't yet seen all the 2nd, 3rd, and 4th order effects from these unemployment and business closure numbers that I fear are going to do the real damage. The most chilling of these to me is a near- total collapse of the commercial mortgage-backed securities market, which is now getting it from 3 sides: shuttered business tenants not paying rent, the 2nd order effects of residential homeowners missing payments, and the 3rd order effects from residential tenants missing rent. People say "well just forbear for 3 months and tack on the payments to the end of the mortgage." It's not that simple.

My intent was to hold the shorts for the remainder of that week of April 6th, but I'm being stubborn and still waiting for the next correction. You know it's fucked up when you turn short positions into a medium-long(ish) term investment strategy, but that's basically what I've done.

Very interested in hearing others' thoughts/opinions.

I understand that politics matter to market performance and are inevitably going to come up in a thread like this, but can we PLEASE try and refrain from the anti- and pro-Trump hysterics and keep it civil in this one? Thanks in advance.
 
#2
DEAC......Diamond Eagle Aquisitions

They are merging with DraftKings very soon and will change their sticker symbol to reflect DK. Owning DEAC at the moment is better than an IPO because so many are unaware of the merger
 

ejd_5277

EOG Dedicated
#4
DEAC......Diamond Eagle Aquisitions

They are merging with DraftKings very soon and will change their sticker symbol to reflect DK. Owning DEAC at the moment is better than an IPO because so many are unaware of the merger
I was aware of the merger and I did look into that stock. Any fear on your part that the merger will be postponed due to DK's basically being shut down completely at the moment?
 
#8
DEAC might be a good buy.

I bought me $2500's worth when it was like 10. Januaryish

Just checked it out (was afraid to look), it didnt get crushed... to my surprise

That is a good sign that money will be flying into it when sports resume
 
#11
I was aware of the merger and I did look into that stock. Any fear on your part that the merger will be postponed due to DK's basically being shut down completely at the moment?
Not much fear at all at the moment. I read a few days ago final details of the merger were in place and everything sounded positive.

With the desperate situations state economies are in I’d imagine they’ll be rushing to legalize sports gambling.
 
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#14
To EJD's short position:

FWIW: I saw an interesting crawler on the BBC about the IMF's managing director's rather dire prediction:

The International Monetary Fund recently announced the "Great Lockdown" recession will drag global GDP lower by 3% in 2020, but its managing director now thinks the gloomy outlook could be too positive.

The coronavirus pandemic is set to leave 170 countries with lower GDP per capita by the end of the year, but the projection "may be actually a more optimistic picture than reality produces," Kristalina Georgieva told the BBC in an interview.


https://www.businessinsider.com/eco...inkage-coronavirus-too-optimistic-says-2020-4
 
#19
Crude oil cratering this morning... down 37% to $11-something/barrel.

Futures off abut 2%. Normally news like this would send the market into an absolute tailspin.
 

Valuist

EOG Dedicated
#20
There was some stock market-related stuff popping up in the MLB talk, and I figured it was worth its own thread. There are some smart guys here whose opinions I would certainly listen to.

I took some big broad-based ETF short positions at the close on April 6th, when the Dow posted a 1,600 point gain. I figured the rally off the lows was nothing more than an extended period of short covering given how far things had fallen and how quickly.

Boy, was I wrong.

To say I can't figure out why the market is behaving as it is is an understatement to say the least. It roars forward on any small piece of good news, and just shrugs off (or even rallies on) initial jobless claims numbers literally 10x worse than ever seen in history. Sure, a drop like we had off the February highs by definition prices in a ton of bad data going forward. No matter how much stimulus the Fed puts out there though, you just can't do as much damage to the consumer as is being done here and expect some kind of V-shaped recovery. This is going to take a decade to fully recover from IMO. We haven't yet seen all the 2nd, 3rd, and 4th order effects from these unemployment and business closure numbers that I fear are going to do the real damage. The most chilling of these to me is a near- total collapse of the commercial mortgage-backed securities market, which is now getting it from 3 sides: shuttered business tenants not paying rent, the 2nd order effects of residential homeowners missing payments, and the 3rd order effects from residential tenants missing rent. People say "well just forbear for 3 months and tack on the payments to the end of the mortgage." It's not that simple.

My intent was to hold the shorts for the remainder of that week of April 6th, but I'm being stubborn and still waiting for the next correction. You know it's fucked up when you turn short positions into a medium-long(ish) term investment strategy, but that's basically what I've done.

Very interested in hearing others' thoughts/opinions.

I understand that politics matter to market performance and are inevitably going to come up in a thread like this, but can we PLEASE try and refrain from the anti- and pro-Trump hysterics and keep it civil in this one? Thanks in advance.
Bear market rallies are vicious. So much short covering, it just drives things up higher. We saw this in 2000-2002 and again 2008-2009. And those bear market rallies can last longer than any logic would dictate. I recently took a short position in Carnival Cruise, and so far that trade is against me. Patience is needed. Nobody is going on a cruise anytime soon, and its going to be a long time before the public is comfortable with cruises. It took the public two full years to go back to Chipotle after their food poisoning fiasco(s).

I would be leery of any "extreme" ETF (2 or 3 times) as those are really only meant to be day traded.
 
#21
Crude oil cratering this morning... down 37% to $11-something/barrel.

Futures off abut 2%. Normally news like this would send the market into an absolute tailspin.
Market isn't reacting much. Look at the oil majors stocks, hardly budging. It's just a short term headline, once the April contract expires oil is going to double in price! This is just an anomaly right now, futures are tied to real deliveries so whoever legally owns the contracts after expiration has to take physical delivery of barrels of oil in Oklahoma and there is a shortage of places to put it.
 
#24
Haha, dumbass people who don't know anything about the futures markets are going crazy online about negative $30 futures contracts on oil saying the world is going to end and every oil company is going to be bankrupt. Its not fake news, its stupid news.
 
#27
Oil is down 300% today, minus $37 / barrel. I do not know what that will do to the retail price of gasoline. In the Detroit area, I've seen $1.09 by me, and my buddy filled up for 89 cents at Costco. Yesterday, the $1.09 place was at $1.25.
 
#29
I learned a lot today about how oil futures contracts work.

The futures contract for the next month expires 10 days before the start of that month. So the May contract expires tomorrow at the close of trading, which for the oil market is 2:30 PM Eastern I believe. At that point, all May contract holders are REQUIRED to take physical delivery of the oil in the amount stated on their contract, or they have to find someone that will.

The problem is there literally isn't any place to put it, so the run to negative numbers today represented the holders of these expiring contracts desperately trying to find buyers for them, and as we saw this afternoon it got to the point where the contract holders were willing to pay other entities to take all this excess oil off their hands.

The June contract, while also sharply lower today, was still trading around $21/bbl last I checked. At this point that's a MUCH better bellwether of the "economic" price of oil right now.

Nonetheless, I fear that this may be the event that awakens the investment world to just how bad things are going to get, much as the NBA cancelling its season on March 11 woke the public up as to just how bad the coronavirus crisis was going to be. It's the first domino to fall, so to speak.

WildBill, how did I do explaining that?
 
#30
I learned a lot today about how oil futures contracts work.

The futures contract for the next month expires 10 days before the start of that month. So the May contract expires tomorrow at the close of trading, which for the oil market is 2:30 PM Eastern I believe. At that point, all May contract holders are REQUIRED to take physical delivery of the oil in the amount stated on their contract, or they have to find someone that will.

The problem is there literally isn't any place to put it, so the run to negative numbers today represented the holders of these expiring contracts desperately trying to find buyers for them, and as we saw this afternoon it got to the point where the contract holders were willing to pay other entities to take all this excess oil off their hands.

The June contract, while also sharply lower today, was still trading around $21/bbl last I checked. At this point that's a MUCH better bellwether of the "economic" price of oil right now.

Nonetheless, I fear that this may be the event that awakens the investment world to just how bad things are going to get, much as the NBA cancelling its season on March 11 woke the public up as to just how bad the coronavirus crisis was going to be. It's the first domino to fall, so to speak.

WildBill, how did I do explaining that?
A+

I was an oil market analyst 20 years ago, I lived this shit. It hasn't changed much. I even went to the Cushing facility where all deliveries are made as part of a marketing boondoggle. There is nothing to see there, all we did is think of Cushing as the mile zero point. All pipelines have at least some oil flowing through them at all times. Right now those pipes are getting full because the shale products are still getting fed in while refiners are taking very little out. At some point the pipes can't take anymore and that's why the physical delivery must be taken out in May.

My guess is next month most non physical traders will get out of their positions earlier so we don't see negative dollar trades, but the risk of it will keep a real damper on next month contract prices because refiners aren't taking more out of the pipes anytime soon and the shale guys need 3-5 months to fully shut down production. Going forward watch all this leads to $75 oil prices faster than you know it.
 
#31
Right... double whammy of supply shock kicking in at the same time demand shock eases. I'm going to look really hard at UCO, USO, and APA come the middle of next month.
 
#32
So can this be invested?

I know nothing about options and shit... so how could I play the rebound without that.

I have heard the etf 'OIL' mentioned and USO but the posters who said them werent overly enthusiastic about them

(btw I am willing to hold the position for years if it need be)
 

Valuist

EOG Dedicated
#33
Tankers may still be interesting for the short run. The oil has to be stored somewhere.

But IMO covid related stocks much better bets. I've been in Abbott (ABT) for awhile. My wife worked for them for 15 years so I'm quite familiar with them. THey are the biggest manufacturer of the quick testing (5 min) kits. Gilead, Regeneron, and GSK are the closest to getting treatment drugs approved. Johnson and Johnson is the leader in terms of a vaccine. Stericycle specializes in removal of medical waste. Just a few ideas.
 
#38
A few stories are getting it, but still a lot of bad analysis on oil price. I talked to an old friend who still works as a consultant to the oil market and the drop in price according to him is 100% tied to what happened yesterday. Traders are freaked the fuck out about holding futures contracts even a month before expiration now. Musical chairs about who's going to find a buyer to close out the trade before its too late. In reality though we agreed, oil prices should be near zero on the market because there is no demand whatsoever for what futures contracts literally are. Most stories don't realize the oil futures market is like 0.1% of the total trade going on for oil, but the 99.9% of trades happening outside the futures markets are real deals for oil that price based on these contracts. So a lot of weird shit is going on outside of the market and it will eventually lead to demand to come rushing back to the futures contracts as some sellers are going to tell their customers we refuse to sell at $10-15/bbl.

In any case stay FAR away from USO right now people. Its a bizarre "fund" that buys futures contracts only, it holds absolutely nothing physical. And right now its acting totally wild because futures are not tied to most real marketplace activity either.
 
#40
Just in time for it to tank to $17.37. LOL.

I may just buy more at the discounted price.
Haha-I’ve followed this stock pretty close since I purchased and today has been emblematic of its performance. It will make some healthy moves up and drop back down. Overall the trend has been positive and I think when they officially change the symbol and name to DRFK or whatever they use it should make another jump.
 
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