Hey everyone! Haven’t been writing as many new posts as I would like to be, mostly because I am trying to manage a moderately bad flare-up of RSI. Have been meaning to share some custom infographics that dive deeper into the S&P 500 and look at what stocks are out there and interesting beyond the “Magnificent Seven.”
I tend to consider Amazon (AMZN), Google (GOOG), and Microsoft (MSFT) to be buying opportunities. Ambivalent about Nvidia (NVDA) and wondering how exactly Tesla (TSLA) stumbled onto this list in the first place. As I have expressed a few times before, I think that Apple’s (AAPL) glory days may be in their past but they still possess the most icon and beloved brand of the Internet era. We’ll see whether that can save them from their current slump.
My view is that the big five banks might actually be a good deal right now for middle class investors who want to diversify into holding actual stock as well as mutual funds. Not sure yet. It sort of depends what happens with Basel III Endgame. More on why another time — and yes, I am aware that bankruptcies are on the rise, consumer debt is a morass, and commercial real estate looks like a federal disaster area. (You can almost visualize a blue FEMA roof on some of these half-vacant downtown skyscrapers… they have emptied out that much.)
What I want to share next may be nothing more than an odd glitch. It’s something that I first started noticing during the “Santa Claus” rally that started in late November of last year. Never before then.
I have two main brokerage accounts.
One is with Robinhood (HOOD). One with Fidelity. They each have pluses and minuses. Robinhood has the better user interface by far. But Fidelity has better customer service, including live phone support. (For anyone curious about my “day job” entails, what I just described is the difference between UI and UX.)
Yesterday, when I was cleaning out my short-term Robinhood account (not my retirement account) I noticed that for whatever reason, I was holding $3.02 of Amazon stock. I decided to sell… just for housekeeping purposes.
No other reason. It was a totally irrational action.
Then I walked downstairs to grab a fresh copy of coffee from the kitchen.
Here is what Robinhood’s chart looked like before selling my $3.02 of Amazon stock:
Here is what it looked like six minutes later:
Could this single trade have caused a momentary “disturbance in the force,” to the tune of a 37 cent drop in share price—aka $3.96B in market cap?
It did make me wonder.
Particularly since it took AMZN most of a day to come back to the same level. At open this morning it was at $174.83, well below my original sale price.
Trading volume that day was light — which is to say less than half Amazon’s usual average of $42M. But the way that quantitative AI trading algorithms work can make them sensitive to small movements in the marketplace that don’t conform to expected algorithmic behavior. In theory, this gives markets a way to pick up on business news and announcements originating from outside the exchanges themselves. As best I can discern, it’s a “ripple” effect, magnifying and amplifying even small changes.
Or maybe it’s just a fluke. If you have an online brokerage and five bucks to make a fractional trade on a popular stock, you can try this experiment yourself. Just be sure to wait until your stock is heading up for the day, with solid momentum. The way the market is going, you might even make 30 or 40 cents of profit!
Rest assured, actual humans are still participating in the system. They have just mostly moved to options trades. I have been noticing lately that it’s much easier to make money buying and selling puts and calls, rather than waiting to exercise them. It’s still too risky to be a good idea for novice traders. With options, the value of your purchase has an expiration date. It will always time-decay to zero. With stocks and mutual funds, you have a decent chance of getting significant passive income over time, even if you never think about those assets once you’ve purchased them.
But I do find myself wondering how many human traders actually pay attention to the news—as opposed to just the numbers. And what it means if they’ve stopped.