THREAD: COUNTERFEIT STOCKS

There are four major players in the industry: Hedge funds, prime brokers, the DTCC, and the SEC.

Hedge funds and the SEC you know of, but the DTCC and prime brokers are important.

Prime brokers are relatively simple - they’re brokers that can clear their own transactions by way of moving actual shares between their clients.

The big prime brokers are ones you’ve heard of - Goldman Sachs, Morgan Stanley, Bear Stearns, Citigroup, etc. - big, big companies.

These prime brokers in turn collectively own the Depository Trust Clearing Corp - DTCC.

The DTCC is an almost impenetrable, behemoth corporation that clears near a billion shares a day and accounts for a vast majority of the clearing house activity in the US market. This is the corporation that ACTUALLY holds physical shares - all your “shares” are on their books

The DTCC is (this will be important later) nearly impossible to get information out of, and it takes an act of Congress or a subpoena to get them to talk on anything.

1/ Since Dec, $TWTR stock has grown 50% above all-time highs. Lots has been said about Twitter’s product upside, ability to capture more of the value it creates (see @Post_Market @juliey4 @modestproposal1). I want to talk about the biggest bull thesis I see: cultural determinism

2/ I'm a huge believer in cultural determinism (see Nintendo essay) - who a company is/been trained ‘to be’ in turn decides who a company ‘will’ or ‘can’ be.

CD is distinct from whether a culture is good, employees talented, committed to change,

3/ By the early 2010s, Twitter began to solidify cultural premises: it was focused on building up ad revenues rather than maximizing reach or users/its network, building a self-contained ecosystem, and in my view, a misplaced obsession with “live”

4/ This contrasted with competitors focused on network growth (FB), product enhancements (Snap), total creators (YT, Unity). Instead, Twitter throttled APIs and 3P devs, ignored opportunity to be a standard protocol for internet comms (h/t @AVC in

5/ How did we see this? Lots of externally focused product investments – e.g. SeeIt TV Everywhere authentication experience w/ Comcast, helping TV networks integrate Tweets into live TV, allowing advertisers to buy Twitter adds… through Google

Today we're gonna talk about profits. They come from stock! #AdamSmith reminds us that stock is any resource paid for in advance when doing business. In general, profits and wages don't move together. (I.ix.1–2) #WealthOfTweets #SmithTweets

As stock goes up, there's more of it to employ more workers (by paying them or providing machines for them to work or both). This raises wages! But new stock competes with existing stock, which tends to lower profit. (I.ix.2) #WealthOfTweets #SmithTweets

If you thought figuring out the average wages of labor was complicated, don't even think about trying to figure out the average profit of stock. Basically impossible. Luckily, the rate of interest tends to vary with the profits of stock. (I.ix.3–4) #WealthOfTweets #SmithTweets

Lots of laws have tried to control interest rates and stop usury. They've all failed to do either. (I.ix.5–9) #WealthOfTweets #SmithTweets

Profits and wages rising together is unusual, but it happens. In particular, in new colonies. (I.ix.11) #WealthOfTweets #SmithTweets

What are prices?

A layperson’s guide to understanding charts and volatility.
1/

It’s an observable fact that price has nothing to do with value. Perhaps over the long term these two converge, but in the short term it makes no sense that the price of, say, soybeans would change 3-4% from day to day.

So what’s happening?
2/

You’ve probably heard people say “markets are forward looking” and that’s sorta true, I guess.

But that doesn’t mean they’re any good at it.

It might be better to say “markets consistently attempt to look forward” because that would be more illustrative of what’s happening.
3/

When a day-over-day price makes a 3% move this is not a 3% shift in value, it’s a 3% shift in *aggregate expectations about future value.*

And that makes sense, right? Expectations are pretty ephemeral so they can move fast.
4/

Consider volatility through this same lens. When a market is highly volatile, this means that expectations about forward value are evolving rapidly.

This happened in March when everyone got scared about Covid - it broke people’s forward expectations, and thus broke markets.
5/

Full chart learning course 🎓
In single thread 🧵

Process of trading through
price action ✨👇

1⃣Time frame - always start looking chart 📊 with higher time frame (weekly/monthly) then after go for lower one .

Positional trader - weekly/monthly

Swing trader - daily /3hours

Intraday trader - 15/30min

2⃣ demand /supply zone - then draw major/minor demand & supply zone .।।।

Ex : #SIS

3️⃣ Trading style -

⚡If you are positional trader then focus on major demand & supply zone.

⚡If you are swing trader then focus on minor demand & supply zone.

Wait for price to come on it then, 👇

4⃣find consolidation -

⚡Positional trader - consolidation should be above 1/2years.

⚡ swing trader - consolidation should be below 1/2 years

⚡Intraday trader - consolidation should above 5/10 days.

Ex - #galxo / #triveni / #vimta

Grab a coffee. This thread will be informative & long.

An exchange infrastructure that offers ZERO trading fees and DEEP liquidity - Meet @wootraderS

In a way, Wootrade is to exchanges what #Ethereum is to #DApps 🔥

..And they have a token, $WOO

Here are my findings👇

Wootrade was incubated by Kronos Research. (Similar to $FTX being incubated by @SBF_Alameda )

Kronos Research is a quantitative investment research institution.

Its daily volume is over $1 billion!

Wootrade offers traders, institutions and exchanges deep orderbooks and best trade execution.

The problem: Exchanges have to pay high costs for market makers.

The solution: Wootrade removes that need for them + lets their clients enjoy trading free of charge.

Exchanges need to stake a tiered amount of $WOO for some of the usage.

This generally offsets the costs for market makers. Plus, exchanges earn staking rewards from the token!

Here are some that use it already: @MXC_Exchange, @Hoo_exchange, @gate_io.

Look at the spreads of Hoo after implementing Wootrade.

They're super thin!

GameStop hearing has begun here, I'll be intermittently live tweeting if anything interesting

One thing so far, Waters announces this is the first of a series of hearings, and future ones will include regulators and policy discussions.

Remarkable pronunciation of "Dough-GEE-coin" from ranking member Patrick McHenry (R-NC)

McHenry taking the pose of a futurist triumphalist lauding the glories of financial innovation, tinged with a little populism

"We can't lock investors out of the rich possibilities of useless over-speculation!" McHenry, approximately

So I've followed DFV's $GME journey from beginning and think it says a lot about what's going on here. How do u go from $50k to $40ml deep value screening in about a year which btw beats $nflx and $amzn growth return holding for decades? A

1)
As someone who tried the blockbuster rinse and repeat short (unsuccessfully btw) on $gme almost a decade ago I'm quite familiar with the name. Burry's re-emergence at the end of 2018 & roughly $5ml gme position disclosure then put the stock on the deep value radar.

2)
$gme dropped like 50% in h1 2019 and his q2 disclosure indicated he had exited the name. It was at this time DFV emerged onto WSB with an essentially i'll take this shot at half MB's cost basis with the console refresh a year out thesis.

3)
I don't recall him fully articulating the thesis then, but that really didn't matter as MB remerged with a 3-4% activist stake by the Aug 2019 about 70% lower than his year end 2018 cost basis. MB wanted a buyback immediately & criticized mgmt past capital alloc failures.

4)
To be clear the thesis did not provide deep dive analysis on $GME or the industry. MB simply seemed to be of the view that the console refresh meant things were not ending anytime soon, and that simply buying back stock in size was the right move for mgmt.

A Bloomberg article today reported that human-run hedge funds trounced quants in 2020 - a turnaround from the experience of recent years. Renaissance Technologies - run by Jim Simons - saw its Institutional Diversified Alpha & Global Equities funds fall by 32% and 31%

The fundamental problem with computer/AI driven trading strats is - and always has been - that the models will never be capable of evaluating novel situations which have not happened before. This was undoing of LTCM, as well as port. insurance which caused 1987 stockmarket crash.

A global pandemic was not in the past datasets, so the bots don't know what to do. AI is only good where you have sizeable and complete datasets that can 'train' the AI to recognized statistical patterns too complex for humans to extract, and use it to make accurate predictions.

This works phenomenally well in situations that regularly recur within the bounds of a confined range of possible outcomes, but it is prone to disastrous error where discontinuities can occur where outcomes can suddenly bear no resemblance to outcomes in past datasets.

How do you teach an AI to determine if there is a cat in photo? You 'train' it by showing it millions of photos labelled by humans that tell the AI whether there was in fact a cat in it or not. The AI pick ups statistical regularities & uses to make inferences on new photos.

Australian iron ore producer Fortescue (FMG AU) is a great example of how value investing often works in practice. In 2018 the stock was trading for A$4. It was cheap at spot iron ore - a mid single digit FCF multiple, even w historically high discounts on low-grade 58pc Fe (1/n)

The reason it was cheap was investors believed the increased 58pc discount was structural not cyclical, and benchmark iron ore prices of US$60-70/MT were not sustainable - Chinese demand would surely falter, and send prices down to US$40-50/MT (2/n).

I basically agreed with the market. That was also my expectation. But I decided to buy some anyway because I recognized I could be wrong, and if either iron ore prices stayed at US$60/MT or rose; OR 58pc discounts narrowed to historical levels, the stock would prove very cheap.

Meanwhile, the stock was fairly priced on the base case market expectation (mirroring my own), at perhaps a HSD FCF yield. Not many investors make an investment on the basis that they might be wrong, but I did due to (1) the asymmetry; and (2) the future being hard to predict.

So what happened? Unexpectedly, there was a Vale dam failure in Brazil, taking out several 10ms MT of supply. Chinese demand remained strong. 58pc discounts narrowed, and covid further interrupted Brazilian supply, while Chinese have stimulated infra to offset covid headwinds.

21 stocks for 2021: Day 9 - Redfin $RDFN

The Bull Case: Redfin calls itself “A Technology-Powered Real Estate Company” whose mission is to “redefine real estate in the consumer’s favor”.
[1/9]

Bull Case Continued: They invented map-based real estate search and have the most visited brokerage website, which translates to low marketing costs. Redfin has a high net promoter score and better repeat business than their competitors.
[2/9]

Bull Case Continued: They have full time agents who are rewarded based on customer satisfaction instead of commission which means their incentives are better aligned with the customer.
[3/9]

Bull Case Continued: Redfin can claim to save customers money (reduced listing fees) and time (more on-time closings) along with offering a complete solution (brokerage, mortgage, title insurance).
[4/9]

Bull Case Continued: Redfin isn’t just an iBuying play. They are prepared for the future of real estate no matter what form it takes: Brokerage, Concierge, Now, Direct. Impressive leadership from CEO Glenn Kelman (CEO for 15+ years).
[5/9]

Thread on sideways market:

Sideways price action or consolidation is a phase where institutional players are silently building their positions transacting in smaller quantities.

(1/n)

What we need to understand is that big players have huge amounts of money and one major disadvantage of having such large cap is that they cannot transact in big quantities without being spotted (aka volumes)

In order to minimize this disadvantage to an extent, they will begin building their positions with many smaller blocks of orders to look like multiple small players and to not alert other market participants much.

This kind of price action does not result in major market moves since moving markets requires aggressive buying/selling at market prices.

Instead it results in a sideways price action.

When their positions are built, aggressive activity begins which results in markets moving in a trend. First positions are built slowly and then markets are moved aggressively in the favorable direction to get profitable.

Letter from the stock markets to the sceptics: "I may be high, but I'm not crazy." Caution, this thread may not age well, but I didn't really write it :).

~Thread from a twitter economist.

They world is in one of the biggest crisis since the 2nd world war, but the stock markets seem to be on a relentless upward move. They appear completely divorced from reality. Really? Probably not. Here are reasons why the markets may be euphoric, but aren't crazy or stupid.

a) Lot of liquidity provided by central banks to rescue failing businesses - globally. Central banks and governments buying all kinds of securities including junk bonds directly!

b) Much of the western world is in the arena of 0 or negative interest rates, and anything which moves (above 0 returns) looks tasty enough to be eaten (bought)

c) The Sensex is just around 10% up from its January levels - so not really frothy territory (if you were to ignore the epidemic)

Analyzed last 12 years of historical data to check if there are any patterns we can observe to find the best time to invest in stocks for long term. #Nifty50 #investing #stocks 1/10

This is how Nifty moved in last 15 years with three major corrections, in the year 2008,then around 2016 and then year 2020 due to Coronavirus. Only when we look back with hindsight bias we could say those were the best time to invest. But is there really any quantitative method?

200 day moving average is something that is widely used by many investors to check for long term trend. Where investors consider if stocks trades above 200 DMA, its in bullish phase and if it trades below 200 DMA its in bearish phase.

We shall run an analysis to find out of Nifty 50 stocks, how many number of stocks trades above 200 day moving average, higher the number, stronger the market. we need correct data, we cannot test it with current Nifty 50 stocks,

we need list of Nifty 50 stocks that are part of index historically, so when we run for Jan 2008, stocks like RPL, RNRL, UNITECH were part of Nifty 50, so it is essential to test it with correct datasets.

Have you ever wondered why price of large cap cos like Reliance ind. Ltd. or Apple inc. fluctuates less in magnitude but share price of a small cap co witnesses huge volatility?
A simple thread to explain the economics behind stock fluctuations!👇🧵
#investing #financialliteracy

1. Penny stocks show huge volatility but on the other hand stock of large cap companies show little fluctuations.
Did you ever observe how ‘Foreign Exchange’ rates show little fluctuation and are range bound?
Let us understand the economics behind it.

2. In this thread we will learn two things,
👉Why large companies show quick change in their prices though the magnitude of change is less?
👉What causes huge jump in prices of penny stocks? Or why on a bad day they can easily fall with huge magnitude?

3. First things first. Let us understand who decides the price of goods? Is it the ‘Buyer(s)’ or the ‘Seller(s)’?
The answer to this basic question is that price is decided by both of them.

This is because,
👉 A ‘Buyer’ would always be willing to buy any commodity at lesser price.
👉 A ‘Seller’, on the other hand would try to sell his product at a greater price.

Why 90% of the traders even after winning 90% of the times gives it back to the markets?

Has this ever happened to you, That you are up 10% on the month and you feel crazy, but the next morning you give it all back to the markets?

What Causes You to Give It All Back?

Thread-

1. Euphoria-

It is the state of mind in which we can not perceive risk, In state of euphoria nothing can go wrong.

So when you are in this state of mind, you feel invincible and there is nothing in the world which can stop you from making money.

That’s why when most of the traders after a winning streak put a Huge position and then Boom, all the luck goes for a toss.

Think about it why most of the traders loose big money when the market starts to go in bear mode from bullish mode, because

when the markets are in a bull market, even if you take trades based on your neighbor recommendation most of them will be right

"Felling too good is not good for your trading"

Winning gives you dopamine rush, And when you trading to get right often you are just feeding your ego

The evolved trader recognizes that winning simply means that you landed on the right side of probability. That’s all. There is no reason to get excited.

It’s just probability and you have an edge that gives you an advantage in the randomness of probability.

https://t.co/Cqqb7aLZVp

Gold and silver have been total dogs these last six months. BTC has just outperformed. I attribute this to Wil Self and his Quantity Theory of Insanity.

That there is, after all, a finite set of molecules in the universe of alternative assets - the last hold out for those seeking diversification.

My interpretation is that investing in this sector is analogous to growing followers on my Instagram account - that just as one group’s starting to get it another are unsubscribing...

In this world, and maybe it’s just for the moment, but Peter gotta pay Paul, ‘cause there’s only a limited amount of sanity remaining in the world. So, when @ScottMinerd says theoretically BTC can go to $400k, i.e., 10 x higher than now...

1/ I used to think that the biggest gains had to come from stocks that no one knew about

One of the harder lessons for me to internalize has been that oftentimes, unknown stocks stay unknown for a reason and you can still earn attractive returns from stocks everyone's bullish on

2/ While I’m not contrarian just for the sake of being contrarian, I do think it’s important to question everything.

When I started out, I would buy "quality" stocks like FB or TSLA without doing much research.

But an opinion being consensus doesn’t make it the truth.

3/ So owning the most popular stocks made me nervous. If a winner is so obvious then either it's priced in or maybe I'm missing something?

I preferred owning stocks that others weren’t aware of or were bearish on for the wrong reasons (more room for upside surprises).

4/ But there are degrees

Despite being widely popular, stocks like SHOP have been some of the best performers because they exceeded even the most bullish projections

And some stocks like TSLA are partly popular because they are great consumer products which is an important sign

5/ On the other hand, while the biggest winners can be found in micro-caps, many of which started out very undervalued with no analyst coverage, on average, they tend to underperform larger caps

Picking out the big winners earlier on is very difficult and there is no set formula