Earlier quoted context omitted.
Does anyone else remember the conspiracy theories around the "plunge protection team"?
It is not a theory.
Is it a conspiracy if they do it?
Michael Burry a.k.a. "Big Short",discloses $1.1B bet against Nvidia&Palantir
141–150 of 352 posts
Re: Michael Burry a.k.a. "Big Short",discloses $1.1B bet against Nvidia&Palantir
#142A bet against Nvidia is smart. A bet against Palantir is not. Palantir has become deeply integrated into the surveillance states of America, and won't be going anywhere anytime soon.
But it has an unreasonable P/E ratio. The price is simply wrong. It doesn't matter if it's the best firm ever and will get its dividends forever. You still calculate reasonably. People say this kind of thing about Tesla as well, and Tesla has been stuck as a slightly-smaller-than-Mercedes-Benz sized firm for years and will stay like that forever, or even shrink relative to MB. NVIDIA has a much more reasonable P/E ra…
Given that the market has moved so strongly away from dividends in favour of stock buybacks and other reinvestment (i.e. the successful companies are now much more often "growth" companies rather than "value" companies), and given e.g. Buffett's wisdom about total return, I don't know that traditional rules of thumb about P/E make sense any more.
Re: Michael Burry a.k.a. "Big Short",discloses $1.1B bet against Nvidia&Palantir
#143how to do such betting ?
TFA says "bought put options" . One option (either PUT or CALL) is typically 100x the shares (but mini lots of 10x exists or at least did exist at some point). So he bought (he's long on the PUTs) 10 000 PUTs on NVDA and 50 000 PUTs on PLTR. I don't know at which expiration dates nor at which strikes. A PUT option can be either a bet (like in TFA) that an underlying shall go down below a certain price before a certai…
I vouched for your post because the information is correct as far as I can discern. Perhaps others felt that you didn't warn strongly enough against engaging in such "full-on degenerate gambling"?
But the risk profile of options depends on more than date to expiration. Of course the strike prices matter, as well as the rest of your portfolio. The real "degenerate gamblers" are taking that leverage without compensating for it. But for example, holding something with 100x effective leverage can be balanced out by only putting 1% of your portfolio there and keeping the rest in cash. (This will generally be inefficient and there's a high chance you won't do as well as just holding the underlying.)
Re: Michael Burry a.k.a. "Big Short",discloses $1.1B bet against Nvidia&Palantir
#144Earlier quoted context omitted.
But it has an unreasonable P/E ratio. The price is simply wrong. It doesn't matter if it's the best firm ever and will get its dividends forever. You still calculate reasonably. People say this kind of thing about Tesla as well, and Tesla has been stuck as a slightly-smaller-than-Mercedes-Benz sized firm for years and will stay like that forever, or even shrink relative to MB. NVIDIA has a much more reasonable P/E ra…
Given that the market has moved so strongly away from dividends in favour of stock buybacks and other reinvestment (i.e. the successful companies are now much more often "growth" companies rather than "value" companies), and given e.g. Buffett's wisdom about total return, I don't know that traditional rules of thumb about P/E make sense any more.
In the end the value is just discounted dividends or there's an arbitrage opportunity under the risk neutral measure.
This isn't a matter of rules of thumb. This is what's required to have prices that do not create an arbitrage opportunity.
Re: Michael Burry a.k.a. "Big Short",discloses $1.1B bet against Nvidia&Palantir
#145Earlier quoted context omitted.
> options world is full of the corpses of dead portfolios Former options market maker here. Please don’t buy options as a retail investor. ( Maybe write to generate income.)
Do you think they're overpriced? Or do you just not trust retail investors to understand the effective leverage, spread of outcomes etc.? I'm told that covered-call ETFs generally underperform (in addition to being inefficient) and "generating income" is best accomplished by just selling shares as needed.
> Do you think they're overpriced?
Options are always overpriced. They're fundamentally an insurance product. You should expect to lose money when buying insurance. If you're hedging, you should expect to lose on your options leg. Same as with any insurance product.
Options are governed by tight mathematical relationships between each other and with their underlyings. These can be atomically arbitraged, i.e. you don't need someone else to believe your thesis to make money. As a retail investor, you are on the other side of a system designed to efficiently price and reprice options to ensure the dealer doesn't lose money.
> I'm told that covered-call ETFs generally underperform (in addition to being inefficient)
I haven't looked into covered-call ETFs, but my prior is strategy ETFs are bullshit even when the underlying strategy may not be.
> "generating income" is best accomplished by just selling shares as needed
Yes. (Or borrowing against them.)
Re: Michael Burry a.k.a. "Big Short",discloses $1.1B bet against Nvidia&Palantir
#146Re: Michael Burry a.k.a. "Big Short",discloses $1.1B bet against Nvidia&Palantir
#147Burry was right about a scam. AI is not a scam. His short positions could simply be a conviction on rate of growth. If he was truly shorting it into collapse, then I'd say he's misguided here. There are also other factors that affect Nvidia. Any move on Taiwan can collapse Nvidia's price down to zero. Hyperscalers can also shift orders over to AMD, Intel, ARM and Broadcom. This is inevitable, but you can't be too ear…
AI is a scam, from eye of an computer engineer.
Its not a scam, from eye of others.
AI is not the only way to address challenge that it aims to solve.
Re: Michael Burry a.k.a. "Big Short",discloses $1.1B bet against Nvidia&Palantir
#148What is the expiry of those options? And how much of his capital is he betting on them? If I'm not mistaken, what made the big short spectacular was him betting the farm on it. Otherwise, wouldn't it be just another day in the office for him?
Re: Michael Burry a.k.a. "Big Short",discloses $1.1B bet against Nvidia&Palantir
#149Earlier quoted context omitted.
Overall for the common person I'd agree, but I assume we're all more or less hackers here and for us, I'd say "If you have to ask, ask and learn, then do it". If everyone followed your advice no one would ever do anything, as we all begin somewhere, something that should OK. Of course, don't do million dollar trades when you begin, but we shouldn't push back on people wanting to learn, feels very backwards compared t…
we shouldn't push back on people wanting to learn but we should really point out very loudly that not fully understanding something like shorting can turn a small investment someone was fully ok with losing into a life altering bankruptcy due to a margin call. Leverage can be a fearful thing.
Yup, I agree, be clear what the consequences are if you fuckup, allow people to fuckup if they wish.
Re: Michael Burry a.k.a. "Big Short",discloses $1.1B bet against Nvidia&Palantir
#150The market will correct before mid-terms next year. This is almost a certainty. By how much and when exactly - now, that's where the shorting profits are. PS. Burry infamously made several more bets after the "big short", bets that misfired. That is, his record is far from being 100% right.
I agree. I'm bullish long term on PLTR but with a 600+ EPS, a bit of a pull back may be healthy for it.
With that said, Burry is often credited for "Calling 18 of the past 2 recessions". Even a broken clock....