Wall Street City: Stock Trading & General Investing Thread

413Blue

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You don't think we should buy crude? That HAS to go up, no?
Lower for longer. Many publicly traded companies will go bust during this period anyway, so almost no way to bank on the eventual rise in prices, whenever it does ultimately go up.
Unless you have some way to store and preserve a bunch of barrels of crude, I don't see any practical way to get involved in crude. Too many players in the industry (Russia, Opec parties) operate with market dynamics as a secondary concern.
 
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NickA

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You don't think we should buy crude? That HAS to go up, no?
There's some great petro and bank buys right now. Good opportunity to buy some of these stocks that also pay dividends.
 
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moogoo

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Can someone give me a reason why I shouldn’t buy American Airline stock?
not gonna tell you NOT to buy it. but trump said during his conference yesterday that the govt would "back the airlines". what that means? who knows. seems like it would be a bailout of some sort. i would wait a bit til that becomes clearer before you buy airlines. also, my gut thinks it's gonna drop a lot more before airline stocks can rally.
 

mgarbowski

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Can someone give me a reason why I shouldn’t buy American Airline stock?
not gonna tell you NOT to buy it. but trump said during his conference yesterday that the govt would "back the airlines". what that means? who knows. seems like it would be a bailout of some sort. i would wait a bit til that becomes clearer before you buy airlines. also, my gut thinks it's gonna drop a lot more before airline stocks can rally.
People who owned GM stock before its bailout lost their entire investment. In any bankruptcy, stockholders are at or near the end of the line of people who get paid in whole or in part.
 
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413Blue

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Can someone give me a reason why I shouldn’t buy American Airline stock?
I would buy something with a stronger balance sheet and more diversified offerings.
I loaded up on Disney at $91.xx and expect to be very happy with that. First, they have strong business lines that will continue throughout this crisis, lessening the impact on cash flow. Second, they can come out of this just as strong as before, with more limited damage.

American is deeply levered to begin with, has almost no competitive advantage, is taking a complete bath right now, and will be still be facing the Max crisis as well for a couple years. Not attractive to me at all.

While I hate the idea of a government bailout, I do support an airline industry rescue package. They are critical to the economy, employ lots of people who would need government assistance in a failure, and their demise is largely tied to government action outside of their control (travel bans/restrictions/advisories) so it's not much of a moral hazard situation.
 

413Blue

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I would buy something with a stronger balance sheet and more diversified offerings.
I loaded up on Disney at $91.xx and expect to be very happy with that. First, they have strong business lines that will continue throughout this crisis, lessening the impact on cash flow. Second, they can come out of this just as strong as before, with more limited damage.

American is deeply levered to begin with, has almost no competitive advantage, is taking a complete bath right now, and will be still be facing the Max crisis as well for a couple years. Not attractive to me at all.

While I hate the idea of a government bailout, I do support an airline industry rescue package. They are critical to the economy, employ lots of people who would need government assistance in a failure, and their demise is largely tied to government action outside of their control (travel bans/restrictions/advisories) so it's not much of a moral hazard situation.
I doubled up on Disney today @86.xx
This may be a turbulent year ahead and could possibly go further down, but looking at this from a 5+ year perspective, this has virtually no chance of doing any less the 10% annually at this price.

I don't like to recommend specific stocks because I'm just some guy on the internet, but this one seems so obvious to me.

Any other names you think will beat the market over the next several years?
 
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413Blue

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Does anyone want to invest in oil storage with me? We gotta get our tanks built in a couple weeks!
 
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adam

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ELI5 how does price go below 0? and also how bad is this?
The price goes below 0 because they are including storage costs. ie the barrel is worth $5, but it costs $6 to store. Then you're at -$1.

I'm not a market guy, I'd also like to know what this means. Should I start welding spikes to the wheels of my car, wear only leather and shave myself a mohawk? Do I really need the price of oil to drop to do those things?
 
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mgarbowski

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The price goes below 0 because they are including storage costs. ie the barrel is worth $5, but it costs $6 to store. Then you're at -$1.

I'm not a market guy, I'd also like to know what this means. Should I start welding spikes to the wheels of my car, wear only leather and shave myself a mohawk? Do I really need the price of oil to drop to do those things?
The price isn't really zero. Certain oil futures contracts are selling for <$0 right now as the holders of those contracts are being squeezed. So you can buy oil if you are able to take delivery of the oil in Cushing, OK at specific times.

The whole thread explains it very well.

Also, if you don't do the leather mohawk thing in quarantine, when will you do it?
 

Rimil

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yes technical reasons reflective of how there is no storage capacity for landlocked oil (i.e. Cushing, Oklahoma). If delivery of these contracts was on a port someone would rent a ship (if any are still available), buy the contract, take delivery and store the oil for a month where they would sell the the next month's future ~$20. If storage was less the ~$20 minus whatever they purchased this month's contracts, then they turn a profit and do this all day long. Ship rates would be reflected in the pricing of future contracts. Problem is Cushing landlocked and is full up, no where to store (and cause of the virus likely less labor to deliver over land) and whoever was holding the long contract at the end clearly decided to puke out the contract at negative prices rather then risk taking delivery and incurring real storage costs and/or penalties.

Last day of the future contract's trading is apparently only available to people with real interest/ability to take delivery. As in people with real economic interest in purchasing/using oil like airlines or refiners. Speculators/ETF are designated "speculator accounts" as in they don't intent on taking delivery. They should have rolled out to the next future date by now if they wanted to hold their oil exposure . If these long holding "hedger accounts" on the last day were playing chicken or underestimated how much oil they needed then they screwed up.

ETA:

broker write up, so not ELI5 version, but not mindblowingly difficult to follow:


Why negative pricing occurred:
  • Yesterday was the day before futures expiry of the May20 WTI NYMEX Futures contract. With 108k lots of open interest to start the day, there were many futures positions that ultimately needed to be traded out of before expiry at 2:30pm EST on April 21st. Anyone who does not wish to take physical delivery or make physical delivery must exit their futures positions prior to expiry.
  • Fundamentally, we traded negative yesterday because of physical constraints and lacking available storage capacity at Cushing. COVID-19 related global shutdowns has resulted in 24mb/d of oil demand to be wiped in April alone, and production is slow to respond and tighten supplies. OPEC+ supply reductions do not start until May 1st, and US economic shut-ins have yet to meaningfully occur. As a result, Cushing is expected to be full in a few weeks. Economically, the rationale of anyone (likely a producer) selling a negative print is that it is cheaper to pay someone to take your marginal bbls than to force shut-ins for a short period of time, as the rest of the fwd curve is still barely economically viable for some, especially those with hedges

What the move in prompt WTI spreads imply for the physical crude market—and everyone’s favorite question… can you take physical delivery of crude oil yourself to monetize the steep contango?

  • Theoretically, you could buy May20 futures, sell Jun20 at a much higher price, lock in the profits and take delivery of May20 physical oil for a few weeks and deliver into the Jun20 expiry. HOWEVER, this is not a process that can be done by most market participants (and hence why the market movement yesterday was so extreme).
  • Despite the steep contango, physical delivery of oil is not easily done. Our explanation and best understanding of the process:
  • Let’s say you are a client currently long May20 WTI NYMEX Futures. Before 2:30pm EST on 21Apr20, you must be out of your futures position, if you have not already notified your futures clearing firm that you are able to take delivery of WTI. You must have proof that you have storage capability either with Enterprise, Cushing or Enbridge, Cushing.
  • After 2:30pm EST today, you (and by extension your clearing broker) are obligated to take delivery. First notices for physical delivery from sellers will be sent starting Wednesday, April 22nd.
  • Deliveries are to be made from May 1st to May 31st, and physical delivery schedules will be arranged between the seller and the buyer for the timeframe, but all barrels must be delivered into either Enbridge or Enterprise at Cushing (seller’s choice). If the seller delivers to Enbridge but you as the buyer only have storage capacity at Enterprise, then you would have to pay a “pump-over” fee.
  • Payment for delivery is owed to the seller on June 20th and is facilitated directly between the buyer and the seller directly (the clearing broker is not involved).
  • Because notices to clearing firms of intent to take physical delivery are expected prior to approaching futures expiration, the prime broker reserves the right to refuse clients from holding onto their positions past expiry; ie we as a clearing broker can refuse a client the ability to take physical delivery if the client waited to close to expiration to provide valid proof that they have physical storage capabilities.
  • For more information, please refer to the CME handbook: https://www.cmegroup.com/content/dam/cmegroup/rulebook/NYMEX/2/200.pdf
 
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413Blue

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The last few weeks have made it crystal clear that the risks of investing in Chinese based companies is massive and unpredictable. People suddenly go months without public appearances while the communists take over the company.
There is money to be made in Chinese companies, but the non-business related risks are massive.
 
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LionNYC

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The last few weeks have made it crystal clear that the risks of investing in Chinese based companies is massive and unpredictable. People suddenly go months without public appearances while the communists take over the company.
There is money to be made in Chinese companies, but the non-business related risks are massive.
Just play the SPAC game.

STIC, THCB, PSTH
 

NYCFC_Dan

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Stupid kids! Lol

The markets are broken
Tech stocks are trading at 1-5 year highs solely because they’re tech stocks. It’s insane. Blackberry was forced to release a PR by Canadian trade commission to explain why their stock was being traded at such high volumes and they basically said ‘we don’t know, nothing has changed.’
 

mgarbowski

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The r/WallStreetBets story about short squeezes has been memorizing. It's absolutely nuts.
I had not heard of it until your post. Fascinating stuff. But the people participating in the squeeze need to decide at this point whether they want to make money or do more damage to shorts. Buying in now is extremely risky. Those who bought in earlier need to choose between maintaining solidarity and locking in gains. The interests of the squeezers are only incidentally aligned.
 

Shwafta

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I had not heard of it until your post. Fascinating stuff. But the people participating in the squeeze need to decide at this point whether they want to make money or do more damage to shorts. Buying in now is extremely risky. Those who bought in earlier need to choose between maintaining solidarity and locking in gains. The interests of the squeezers are only incidentally aligned.
I mean, pretty much anyone who doesn't know what they're doing here will get screwed over in the long run. The ones that know what they'redoing, and started it in the first place, are the ones that are going to run away with it - the guy that first figured out how much of the stock was short, he's the one that's gonna make a killing. (and probably already has).

...I'm one of those "don't know what they're doing", so I didn't enter this scramble.
 

413Blue

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I had not heard of it until your post. Fascinating stuff. But the people participating in the squeeze need to decide at this point whether they want to make money or do more damage to shorts. Buying in now is extremely risky. Those who bought in earlier need to choose between maintaining solidarity and locking in gains. The interests of the squeezers are only incidentally aligned.
I had a piece of AMC in my little "gamble" portfolio for the last month or so. Today was a great day for me!