Bumble’s IPO, The Yield Curve Migration, and a “Bubble” in Passive Investing?

Published on
February 12th, 2021
Duration
43 minutes

Technical Breakouts in the S&P 500, Treasury Bonds, Retail Stocks, and Bitcoin


Bumble’s IPO, The Yield Curve Migration, and a “Bubble” in Passive Investing?

Daily Briefing ·
Featuring Jack Farley, Ash Bennington, and Ed Harrison

Published on: February 12th, 2021 • Duration: 43 minutes

Real Vision managing editor Ed Harrison is joined by senior editor Ash Bennington and editor Jack Farley to break down recent price action and inspect current market conditions. They analyze the remarkable soaring of Bumble’s stock price after its initial public offering (IPO) with Ash and Ed exploring whether the ongoing market ebullience is evocative of 1999. Ed and Jack then discuss how rising yields for U.S. Treasurys affect banks earnings, the price of earnings, and investor behavior in the credit markets. After the three of them briefly explain how the rise of passive investing is impacting market flows, Ash shares his thoughts on the first publicly traded Bitcoin ETF in North America. Ash, Ed, and Jack relate these topics to recent “Is Everything a Bubble?” interviews with Howard Marks, Joel Greenblatt, Lyn Alden, and Russell Napier, and they look forward to next week’s interviews with Lacy Hunt, Tom Steyer, Felix Zulauf, and Mark Yusko. If you are not a member and you want access to these interviews, click here: https://www.realvision.com/l/is-everything-a-bubble.

Comments

Transcript

  • OC
    O C.
    15 February 2021 @ 16:23
    This is excellent. I am thrilled to hear that Felix Zulauf is coming back. Thanks.
  • MR
    Michael R.
    13 February 2021 @ 04:19
    YCC incoming.
    • B
      Bob .
      15 February 2021 @ 07:39
      I think YCC will be more likely triggered by a rapidly rising 10-year than a 30-year. .
  • MN
    MYLENE N.
    13 February 2021 @ 07:17
    ash gave the absolute best advice that i have not heard those crypto youtubers say. it's always "(your fave crypto) to the moon!"
    • LS
      Lewis S.
      15 February 2021 @ 01:17
      Watch Nuggets News, his latest video is all about taking profits when hype is up.
  • LS
    Lewis S.
    14 February 2021 @ 23:40
    To me the interesting thing about dogecoin is that 1) it demonstrates the cockroach nature of cryptos, even a joke coin can go far and move billions around without failing, but also 2) we may not have seen dogecoin's final form. If the dogecoin community supports modifications to the dogecoin software there is no reason it can't be reformed, modified, made more useful.
  • JS
    James S.
    14 February 2021 @ 22:07
    Someone in the RV community with the requisite tech skills really needs to release Ashcoin lol. If this takes off, everyone on RV will need to buy some just because...
  • DK
    Dan K.
    14 February 2021 @ 04:27
    Jack, you rock man! Those old guys are practically falling asleep. Keep them on their toes.
    • DK
      Dan K.
      14 February 2021 @ 04:29
      :D
  • SM
    Simon M.
    13 February 2021 @ 20:36
    I sensed a degree of uncertainty about the equity market plumbing. The proportion of trades reported to the TRF (Trade Reporting Facility) has risen over the past 12 months and is touching 50%, as noted. The main reasons for this are the rise of the retail trader and the increase in option trading. Zero commissions retail trades are bought by the likes of Citadel and Virtu and, as much as possible, paired off internally at those firms. The transactions are reported to the TRF. Cash equity market transactions that are executed as a consequence of derivative activity are booked in the "upstairs market" and again, are reported to the TRF. The rise in TRF reported trades was referred to as dark pool trading and decentralization. To the latter point, these trades take place away from the main exchanges, NYSE and NASDAQ, but I am tempted to call this recentralization. Citadel and Virtu's market share is through the roof as a consequence of increased retail and option trading and this is not generally accessible to mainstream institutional funds. Large derivative houses, such as BNP Paribas, have seen a significant jump in share of reported cash block trades, but almost exclusively due to option activity. Again, institutional funds do not have ready access to this flow. Thus off-exchange activity has risen sharply, but to point to dark pool trading is a little misleading. Institutional block trading at ATS (Alternative Trading Systems) has not risen as a proportion of activity and institutional traders complain about transitory liquidity in lit markets, in even the largest and most traded stocks. If they did try dark pool trading to find liquidity and to save the bid-offer spread, which has been jacked up by market makers over the last year and contributed to those record investment banking profits, then they would hardly be blamed.
    • AB
      Ash B. | Real Vision
      14 February 2021 @ 03:18
      Thanks, Simon. Great comment.
  • TN
    Tim N.
    14 February 2021 @ 00:35
    The three horsemen of the apocalypse
  • MO
    Marcus O.
    13 February 2021 @ 00:30
    Ed, At about 16:50, I think you are making the wrong point (which you made previously) that when the price of Gamestop went up, people in the index had to effectively buy more Gamestop stock. Is this really the case? The index increases in value because it holds Gamestop stock; its proportion in the index increases with value, but it shouldn't force the index to buy more shares. It is only when you have net purchases or sales of the index that there would be any multiplier effect. Is my understanding of this wrong?
    • TW
      Todd W.
      13 February 2021 @ 00:42
      I understand what you are thinking. Hopefully this helps you visualize what is happening. The market cap weighted indexes did add gamestop. https://www.etf.com/stock/GME
    • EH
      Edward H. | Real Vision
      13 February 2021 @ 00:51
      My point is not that you must immediately sell when the price goes up or down. It’s that the relative weight changes the index composition and causes inflows or outflows that force buying or selling. See here for example https://www.bloomberg.com/news/articles/2021-01-28/gamestop-is-creating-problems-in-sleepy-world-of-index-following Also it depends on whether its equal weight or market cap weight as to whether it forces selling or buying of individual names when shares of individual names soar.
    • EH
      Edward H. | Real Vision
      13 February 2021 @ 00:55
      In terms of the narrow point of XRT, what I am saying is that the price action there also has dominated index moves in a way that distorts buy/sell technical indicators. And that too can trigger momentum buying or selling
    • FD
      Frank D.
      13 February 2021 @ 08:58
      While the dollarvalue per indexbasket might go up, the amout of fractional shares per index basket stays the same.
    • SM
      Simon M.
      13 February 2021 @ 20:56
      I think there is a misunderstanding of Mike Green's argument, but of course we need him back on the platform to clarify. As I understand it, the argument that passive is in fact active, is caused by flow. Jack Bogle argued that index investing was passive because it rode the market up and down and did not influence performance. Hence Gamestop rallying or falling would not cause buying or selling of the stock in a static index fund, because the weighting would adjust automatically. New flows of money into passive funds do force continued buying of the best performing shares however, because these shares have risen to be the largest names in an index. The steady flow of 401K investing, and regulations that favor low cost, index funds as default investments, is the passive bid under the equity market. As I understand it, Mike argues that the Q1 2020 sell off was not caused by passive flows, because the shares outstanding of the most popular ETFs kept rising with barely a blip. The pandemic selloff and recovery was caused by active investors. My own view is that active funds generate the fluctuations around the trend caused by passive. Carson Block was on the Daily Briefing last week and I believe he misrepresented Mike's argument, as Ed did today, by saying passive caused last year's sharp fall. Rather, again as I understand it, Mike argues that passive will cause exaggerated falls in markets when flows reverse and investors are net sellers of funds. This will occur when the money withdrawn by Baby Boomers in retirement, and over the age of 70.5 and forced sellers, exceeds the inflows from younger generations. I believe it is this tipping point that Logica is attempting to identify, but I'd love to have Mike back to clarify the debate.
  • FL
    Fabrizio L.
    13 February 2021 @ 20:36
    Incredible how everyone is trying to somehow explain, excuse, rationalize, understand and narrate what is going on. They say people see a bubble only in hindsight, its not true I see it now! Remember this I see it! There is no other explanation its tulip mania all over again, its the plateau, its just that the party is such fun that no one wants to go home! Its happening again, and there will be some great opportunities soon, forget the ones you may miss now, keep your powder dry! Hear this, 10 year yields are up 100% since august, should this have an effect on the “accepted” valuation narrative? Interest rates up 100 % valuations keep going up.!? Come on find a cool little rational explanation for me!
  • LD
    Lisa D.
    13 February 2021 @ 16:39
    Not sure how they differ from the Purpose BTC ETF but I've been investing in Canada in QBTC.U and QETH.U for months. They track Ethereum and Bitcoin and have obviously done quite well. These two just track BTC and ETH so in no sense do I own the actual coins. Maybe Purpose is the first one where you actually have coins allocated to you?
  • AK
    Alexander K.
    13 February 2021 @ 15:37
    Very cool - great discussion guys. Have a great, long weekend.
  • PG
    Philippe G.
    13 February 2021 @ 15:14
    A Jack & Ed SPAC!?!?!...TAKE MY MONEY!!!
  • MH
    Muddshir H.
    13 February 2021 @ 07:13
    Great work guys
  • WF
    Will F.
    13 February 2021 @ 07:05
    talk about marketing... gees that a call to please upgrade to plus. where the news I paid for?
  • DJ
    Dennis J.
    13 February 2021 @ 06:19
    Wouldn't a possible strategy be to look for the explosive and irregular moves (30%+ daily or more) and then buy puts for the re-calibration. Short duration. It keeps happening: GME, AMC, TLRY, etc. Lord knows we haven't seen the last.
  • MR
    Michael R.
    13 February 2021 @ 04:29
    Call your SPAC JackSPAC. Then you can blame JF!
  • jW
    john W.
    13 February 2021 @ 04:27
    in 2000 everyone said a correction was coming, and they also said, "but the bull market would last 1 more day"....
  • MR
    Michael R.
    13 February 2021 @ 04:20
    30yr UST cracked over 2%. Ruh-roh.
  • MR
    Michael R.
    13 February 2021 @ 04:17
    Bullish on A-Rod's SPAC. WTF?
  • SR
    Sam R.
    13 February 2021 @ 02:28
    Right on, SPAC it is. :D
  • GA
    Gary A.
    13 February 2021 @ 02:26
    Very nice DB gents. I didn't know about that LSD story. I have a feeling we might be heading into a liquidity trap.
  • BH
    Benson H.
    13 February 2021 @ 02:23
    Well said. Most of the time, people will spend too long on price but not understanding the strategy , risk and product.
  • GT
    Guillaume T.
    13 February 2021 @ 02:01
    On Ash, last comment. Mining Crypto is a good start to learn about the eco-system. Convert some electricity to start to navigate the crypto industry, build opportunities, and planning practice. Glad to not hear the usual "Let's go to the moon"! Let's keep that one for tik-tok investors!
  • NN
    Ninh N.
    12 February 2021 @ 23:39
    it's like the Dream Team today :)
    • AB
      Ash B. | Real Vision
      13 February 2021 @ 01:08
      Thanks, Ninh. We appreciate that!
  • BT
    Billy T.
    13 February 2021 @ 00:10
    I have already converted to cash in my 401k! lol!
  • MR
    Michael R.
    12 February 2021 @ 23:56
    A bubble in Passive? You don't say! ;)
    • JF
      Jack F. | Real Vision
      13 February 2021 @ 00:04
      Haha yes and in other news, the grass is green