WhosGuys | Market Speculations

September 15th, 2023

Whos News Briefing – Market Speculations

  • New IPO Arm Holdings PLC $ARM
  • Will $ARM Dump?
  • Mexico Finds Aliens?
  • The Charles Schwab Corporation to Acquire TD Ameritrade.
  • Will TD Ameritrade be merging with Chares Schwab Corporation?
  • Is commercial real estate safe as a long-term investment?
  • Big movements within the chipmakers market.
  • Disney to sell ABC.
  • Can small banks, insurance groups, branches, and wealth management markets like $BHLB, $GSBD, and $PFG bounce back?
  • What happened to civil debates in America?
  • Tesla to $1000?
  • What will be big market movers coming to the end of 2023?
  • Is Oil ramping up? Oil to go above $92?
  • Understanding Bonds before reading.
  • Whos NFT w/ OpenSea & Rariable ( WhosGuys )

Thinking about Shorting the Market?

Short selling can be a complex and risky strategy, and it’s important to understand the mechanics and risks involved.

Understand Short Selling: Short selling is the practice of borrowing shares of a stock or an exchange-traded fund (ETF) from a broker and selling them with the intention of buying them back at a lower price in the future. The goal is to profit from a price decline.

Open a Margin Account: You will need a margin account with a brokerage firm to engage in short selling. This type of account allows you to borrow securities to sell short. You may need to meet certain eligibility criteria and provide collateral to open a margin account.

Identify the Bank Stocks or ETFs: Decide which bank stocks or ETFs you want to short. Research and analyze the banking sector to identify potential targets. Look for banks that you believe are overvalued or facing financial difficulties.

Contact Your Broker: Contact your brokerage firm and inform them that you want to short-sell specific bank stocks or ETFs. Your broker will check if the securities are available to borrow and execute the short sale on your behalf.

Place the Short Sale Order: Work with your broker to place a short sale order for the chosen securities. Specify the number of shares you want to short and at what price. If the order is executed, you will receive the proceeds from the sale in your margin account.

Monitor Your Position: Once your short position is established, monitor it closely. Shorting involves the risk of unlimited losses if the price of the securities rises significantly. Be prepared to cover your short position if the market moves against you.

Buy to Cover: To close your short position and realize any potential profits (or losses), you will need to “buy to cover” the same number of shares you initially shorted. Ideally, you want to buy them back at a lower price than you sold them for.

Risk Management: Implement risk management strategies, such as setting stop-loss orders, to limit potential losses. Keep in mind that shorting carries inherent risks, and the market can be unpredictable.

Comply with Regulations: Be aware of regulatory requirements and short-selling rules in your jurisdiction. Some markets may impose restrictions or have rules in place to prevent excessive short selling.

Tax Implications: Understand the tax implications of short selling in your country, as it may have different tax treatment than traditional investments.

It’s crucial to note that short selling can be highly speculative and risky. Markets can move against short sellers unexpectedly, and losses can be substantial.

 

Learn From the Professionals

“The Big Short” is a 2015 film directed by Adam McKay, based on the non-fiction book of the same name by Michael Lewis. The movie tells the true story of the financial crisis that led to the collapse of the housing market and the global economic recession in 2007-2008. It explores the events leading up to the crisis through the eyes of several individuals who saw the impending disaster and bet against the housing market, aiming to profit from the collapse.

Michael Burry (Christian Bale): Burry is a quirky hedge fund manager who first discovers that the housing market is built on a bubble of risky mortgage loans. He decides to bet against the housing market by creating a credit default swap, essentially betting that mortgage-backed securities will fail. This decision makes him the first person to see the impending crisis.

Mark Baum (Steve Carell): Baum is the head of a hedge fund who is initially skeptical of Burry’s prediction but eventually becomes convinced of the impending crisis. He and his team started betting against the housing market as well.

Jared Vennett (Ryan Gosling): Vennett is a Wall Street trader who becomes aware of Burry’s strategy and decides to profit from it. He serves as a narrator and guide throughout the film, explaining complex financial concepts to the audience.

Charlie Geller (John Magaro) and Jamie Shipley (Finn Wittrock): These two young investors discover the potential profits of shorting the housing market and team up with an experienced hedge fund manager, Ben Rickert (Brad Pitt), to execute their plan.

 

What is significant about the 2008 Crash?

In 2008, during the global financial crisis, the bond market experienced significant turbulence and disruptions. The crisis was triggered by the collapse of the housing market and the subsequent problems in the financial sector.

Mortgage-Backed Securities (MBS): Mortgage-backed securities, which were backed by pools of mortgage loans, were at the center of the crisis. Many of these securities were based on subprime mortgages, which were high-risk loans made to borrowers with poor credit histories.

As the housing market collapsed and a wave of mortgage defaults occurred, the value of MBS declined sharply. Investors who held these securities faced substantial losses.

Corporate Bonds: Corporate bonds, which are debt issued by corporations to raise capital, also faced challenges during the financial crisis. As the economy weakened, the creditworthiness of some corporations deteriorated, leading to concerns about their ability to meet their debt obligations.

The prices of many corporate bonds declined as investors demanded higher yields to compensate for increased credit risk.

Government Bonds: U.S. government bonds, particularly Treasury bonds, are often seen as safe-haven assets during times of financial turmoil. Demand for these bonds increased as investors sought safety.

The prices of Treasury bonds rose, and their yields (interest rates) fell as investors flocked to these low-risk assets.

Municipal Bonds: Municipal bonds, issued by state and local governments, were affected by the crisis, especially if they were tied to troubled areas or sectors (e.g., bonds issued by municipalities heavily reliant on property taxes).

Some municipal bonds faced increased credit risk, and their prices declined in response.

Emerging Market Bonds: Bonds issued by emerging market countries faced challenges as well. Investors became more risk-averse and pulled capital out of many emerging markets, causing their bond prices to decline and yields to rise.

Asset-Backed Securities (ABS): Asset-backed securities, similar to MBS, also experienced problems. These securities were backed by various assets, including auto loans, credit card debt, and student loans.

As economic conditions worsened, the quality of these underlying assets deteriorated, causing concerns about the value of the securities. Some ABS faced downgrades and losses.

 

Can these events happen again?

Regulation and Oversight: Since the 2008 financial crisis, regulatory authorities in many countries have implemented stricter regulations on banks and financial institutions. These regulations are designed to enhance the stability and resilience of the banking system. For example, capital adequacy requirements and stress tests have been put in place to ensure that banks can withstand economic shocks.

Risk Management: Banks have also improved their risk management practices and become more vigilant about assessing and managing risks in their portfolios. This includes better risk modeling, stress testing, and risk diversification.

Central Bank Policies: Central banks play a crucial role in stabilizing the financial system. They can implement monetary policies to address economic imbalances and provide liquidity support to banks during times of crisis.

Economic Factors: Economic conditions, such as economic growth, inflation, and unemployment, can influence the stability of banks. A strong and growing economy is generally positive for banks, while economic downturns can increase the risk of loan defaults.

Global Events and Shocks: Events like geopolitical conflicts, natural disasters, or unexpected shocks (e.g., a global pandemic) can have significant impacts on the financial system. These events can be difficult to predict and can stress banks’ resilience.

Market Behavior: The behavior of financial markets and investors can also impact the stability of banks. Panics and market sell-offs can lead to liquidity problems and financial instability.

 

It’s important to recognize that while regulations and safeguards have been put in place to reduce the risk of another financial crisis, the possibility of a banking crisis can never be completely eliminated. Financial markets are inherently unpredictable, and unexpected events can still occur. Stay informed about economic and financial developments that may affect the banking sector. Monitor the financial health and stability of banks in which they have deposits or investments.

Ultimately, while the likelihood of a banking crisis has been reduced through regulatory reforms, it’s impossible to guarantee that such a crisis will never occur again. Prudent financial planning and risk management remain essential for individuals and investors

 

Whos news brief is not to be taken as financial advice but a stepping stone to lead you into doing your own research.  Teach yourself and become self-governed.

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