Truth Or Skepticism: Bull Market Fallacy
Truth Or Skepticism: Bull Market Fallacy
By:Mike Butler
Tom & Dylan reunite for another segment of Truth Or Skepticism! On this episode, the guys discuss the recent spike and decline of volatility, and how this market is in a weird place. Jumbotron stocks are exploding from earnings announcements, but executives of some of those very same companies are selling their shares of stock. What gives? Check out the preview of the full segment below!
JUMBOTRON EARNINGS - INEFFICIENCY IN PRICING?
“What would you rather put away for 10 years right now, seven shares of NFLX or an ounce of platinum?”
Tom & Dylan are perplexed by the huge moves in jumbotron stocks. Tom believes it is more of a bubble situation than anything, and believes over time these stocks will come back to earth and normalize. It just adds to the list of red flags he sees in this bullish market, and gives him even more reason to be short.
“Can the intrinsic value of a multi hundred billion dollar entity change by fifty billion dollars in ten minutes?”
VIX & BEHAVIOR OF VOLATILITY
“Is the rate of decay in the vix an indication of a more efficient market or a complacent market?”
Dylan compares the VIX to a high performing car. It revs up quickly, and revs down just as quickly. They discuss whether this is an effect of complacency, or if it is just a normalized asset. Tom believes it is a normalized asset.
“Volatility generally contracts ⅔ of the time, and expands ⅓ of the time, but when it expands, it expands quickly.”
ETF PERFORMANCE
“Has the fed become an anti-intellectual organization?”
Tom & Dylan discuss the bull market fallacy, and how it seems that the dumber you are, the better you perform. ETF’s have been ripping up consistently, and leading people to believe that what goes up, must not come down. Dylan ponders on a potential safe haven play, and asks why that is not getting long stocks like GOOG, NFLX, etc.
“Do you WANT to buy stocks at an all-time high as a safe haven play?”
CEO’S BUYING STOCK BACK
“The companies that are creative with their models (GOOG, FB) do very well. The other companies that are not still do well, but not as well.”
Dylan wonders how buybacks and dividends affect the future of companies today. Tom is worried that if there are not deals that can be made to improve / shift business, things are either overpriced or the model has changed so dramatically that you have to buy things for the future.
“If the most intelligent thing a company can do with retained earnings is buybacks and dividends, then there’s a much bigger problem.”
CHINA
“Can the Chinese government re-inflate its own stock market?”
The guys finish off this segment by discussing China, and the interesting turn of events that have played out over the past few weeks. Tom is interested to see just how much more they can pump into the economy, as they have already pumped a couple hundred billion into it. Dylan spins the question into a comparison of what’s scarier - the thin ice China is on or the passive American investor?
“This is a unique situation because the marketplace is not mature, and they do not have the same infrastructure here, and not nearly the same liquidity”
To see earlier episodes of Truth or Skepticism with Dylan Ratigan, you can watch them here on the tastylive archives!
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