Just a quick rundown of the day’s action, then a couple of quotes. One from a Wall Street legend whose story is on my shortlist of recommended bios to study anytime a newbie trader asks my advice. The other’s from an article published this afternoon on the latest actions of today’s newbie traders.
“Druckenmiller is the Ted Williams of investing. Perhaps the greatest investor of all time. He is a global macro investor with a track record that spans decades, has annualized returns near 30% and has never had a down year.”
Druckenmiller Says Risk-Reward in Stocks Is Worst He’s Seen. By Katherine Burton and Melissa Karsh(Bloomberg) —
Stan Druckenmiller said the prospect of a V-shaped recovery in the U.S. is “a fantasy” and the risk-reward calculation for equities is the worst he’s seen in his lifetime.
“Stimulus programs aren’t building future growth but rather are just giveaways to companies and business owners,” the legendary hedge fund manager said Tuesday during a webcast held by The Economic Club of New York.
“Most traders say that stocks and corporate bonds have soared since late March because they believe the Fed will do anything to prop up markets,” Druckenmiller said.
“The consensus out there seems to be ‘don’t worry, the Fed has your back,’” he said, with both stimulus that is much bigger than the problem and massive liquidity. “There’s only one problem with that — our analysis says it’s not true.”
“That’s because liquidity will soon shrink as Treasury borrowing crowds out the private economy and even overwhelms Fed purchases.”
As for the newbie trader, another article appeared today on a phenomenon that, as I mentioned in this weekend’s video commentary, is too reminiscent of the dot.com days of the late 90s:
Here’s a snippet:
“Robinhood — millennial favored stock trading app — saw a mind-blowing 3 million new accounts in the first quarter, despite glitches and crashes on heavy trading volume days.
“The access to trading, there are no barriers to entry anymore, its on your phone, you can buy whatever you want, fractional shares are available so if you can’t pony up $1,400 to buy one shares of Google you can still own the FANG stocks,” Welsh added.”
“Traders here are ‘buying the dip’ in a lot of names with questionable fundamentals now, i.e. airlines, highly volatile stocks, low in recent price momentum, and ones with that have recently (in the last 3 months) had lottery ticket like upside payoffs occur,” added Krause. “Robinhood investors are making all the classic mistakes in the short
term. May work for today’s market, but not in the long-run
Hmm… “May work for today’s market”… Well, alas, I have my doubts…