Hedge Fund CIO: "$100BN Of Tech Stocks Got Sold And The S&P Was Unchanged. Not Sure How That Happens"

The start of another week is upon us, which means it is time for choice excerpts from the latest letter to clients by One River Asset Management CIO Eric Peters, who today writes about Brexit, the "new generals" in the market (more in a later post), rising populism in a world of tech "monopolies", modern day robber barons, and much more.

We will have more from today's letter shortly, but for now here is Peters on a topic on everyone's minds, volatility, and what Friday's Nasdaq "air pocket" means:

Beep Beep


“Volatility didn’t really move,” said Roadrunner, following the Nasdaq’s Friday afternoon air-pocket decline.


There were no real flows, no one was buying options,” continued the market’s biggest volatility trader. “I’d expect this to continue for a bit at least.” These kinds of things don’t usually end in a single day.


“$100bln of tech stocks got sold and drove the Nasdaq 100 down 4% with the S&P 500 and Russell 2000 unchanged. Not sure how that happens,” said Roadrunner. “But summer is here, people leave at noon, and liquidity is thinning out.”


“The idea of a ‘new normal’ in volatility markets is utter nonsense,” continued Roadrunner. “There is never anything new when it comes to markets.”


We are just at that point in the cycle where volatility collapses - at the end, it always does. “We’re late in a bull market, and like every bull the scariest moves are to the downside.”


Nivida ($89bln mkt cap) fell 15% on Fri from intraday high-to-low, which left it +4% on the week and +46% on the year. He glanced quickly left, right, up. “And in bear markets, the most frightening moves are to the upside.”


Beatscape 847328_3527 Sun, 06/11/2017 - 16:58 Permalink

It was definitely suspicious that the big oil stocks (XOM, CVX, EOG, COP, etc.) were all up strong on Friday even though crude prices were flat all day.  It appears as if there's some sector compensating HFT automated trading for the benefit of the S&P 500.  When one sector is down, another sector is magically strong to keep the S&P 500 up on the day. The disparity between tech stocks, which were crashing, and the rest of the market on Friday was highly unusual.  I watch the oil stock closely and they have been essentially dead in the water drifting down over the past few months while crude continues to be weak. What caused the oil stocks to jump on Friday??  It wasn't oil prices.  It appears that a sector compensation algorithm was at work, compliments of your all powerful central bank.  With so many pensions, etc. based on the S&P 500, the CBs are working overtime to keep it up, and this sector compensation algorithm was clearly evident on Friday.

In reply to by 847328_3527

The Ram chiswickcat Sun, 06/11/2017 - 13:13 Permalink

Like a surfer riding the best wave they have ever surfed, they will take this market into the beach (aka ground).  Why would they give it up?  They have the US government and the US military to enforce the scheme.  99% per of the world will be deeply impoverished before they will yield their comforts.  Look for the US dollar to be essentially worthless before the markets tank for good.  Hopefully, a parallel economic system can be somewhat constructed with precious metals, cryptocurrencies, and barter before the dollar system disappears.  This will be necessary for 50% of the people to survive. 

In reply to by chiswickcat

lil dirtball Climb Sun, 06/11/2017 - 12:32 Permalink

> Rigged

There you go, jumping to conclusions. The author just said they were "not sure how that happens."

I'm sure someone from one of the many regulatory agencies will look into it soon enough and if there's any 'anomalies', an investigation will be opened.

[edit to the downhaters/ZHombies] - This isn't Obamaland anymore, sunshine. This is Great-Again America. President Trump will simply not allow 'market rigging' or any other type of corruption to stain his administration or the shoes of the American people any longer. It's why he has so many watchdogs from the banking industry in his administration.

In reply to by Climb

Justin Case Climb Sun, 06/11/2017 - 11:53 Permalink

Not Sure How That HappensIt's the invisible hand, the man behind the curtain that is pulling the market levers. Today everything is rigged b/c the system is broken and the invisible hand constantly applies the band aid to stop the bleeding. Otherwise the sheople will collapse the system if they knew what is really going on. It's correct term is "panic". Result of panic creates havoc.If you know someone that is terminally ill but still functions as though nothing is wrong and has a life insurance policy with you as the beneficiary, whats the rush?  You win in the end.Got gold?

In reply to by Climb

OverTheHedge Justin Case Sun, 06/11/2017 - 15:47 Permalink

I'm too lazy to check, but weren't we told the other day that central banks own 40% of stock market assets? I work for my money, unlike central banks who just decree theirsa into existence. How can this be considered a "free market" if the central bank's buy market assets at no cost? Why don't market participants cry foul?Sorry - rhetorical questions don't help anybody.

In reply to by Justin Case

NoWayJose Sun, 06/11/2017 - 11:22 Permalink

Rotation out of tech and into energy and financials. No money leaving - just shifting. Now we have to wait to see if the rotation is going to continue, or if the tech dip gets bought.

PitBullsRule Sun, 06/11/2017 - 11:31 Permalink

Those stocks drop like that because they aren't worth anything.  If the price depends on an idea that everybody has, and not on a tangible value, then prices can drop as fast as people change their minds.  Facebook is based on the idea that you can sell advertising to all those people looking at pictures on Facebook.  But none of us pay attention to those ads.  I see ads for things I bought months ago, and will never buy again.  Thats a waste of advertising, but Facebook is getting paid for it.  Eventually those companies will figure out that I only buy a toilet about once every 10 years, so you don't need to show me one you've got for sale, every day.  Its a waste of money, and Facebook has convinced the stock market that its an industry.  The tech stock giants are going down, they always do in a spectacular fashion.  I've worked for a couple of them, its always the same, when they're on top, everybody is a genius.  And when they go down, nobody wants anything to do with them.

Hongcha PitBullsRule Sun, 06/11/2017 - 12:03 Permalink

+1 PitBullsRule.  The valuation at this point, much like it was in early 2000, is 80% notional.  They pay no dividends, regular or special.  They depend on the greater fool.  That, and the greater fool's sister, Hype.  Hype always wears a padded bra.  It's interesting that Amazon has hung around 20 years, because they were in the same position 20 years ago.  I'm not saying Amazon is not a clever company, it is; but not to the tune of a 184 p/e that only fairly recently went positive at all. 

In reply to by PitBullsRule

OverTheHedge wains Sun, 06/11/2017 - 16:21 Permalink

Here's a good game - get someone to check their Gmail on your computer. They will almost certainly forget to log out, and then you get to do all your searches as them. It does mean that you will have random YouTube video suggestions that make no sense, and all their ads will become your ads, but hey - they also get puzzling ads about lubricants and blue pills - hours of fun for all the family.

In reply to by wains

e_goldstein Sun, 06/11/2017 - 11:33 Permalink

There were no real flows, no one was buying options, continued the market’s biggest volatility trader. “I’d expect this “$100bln of tech stocks got sold and drove the Nasdaq 100 down 4% with the S&P 500 and Russell 2000 unchanged. Not sure how that happens,”Gnome magic, dumbshit.xxxoooMr Yellen 

BSHJ Sun, 06/11/2017 - 11:35 Permalink

"Bulls are scared of DOWN moves, Bears are scared of UP moves......what brilliance and deep thinking from a high-paid expert.

gm_general Sun, 06/11/2017 - 11:40 Permalink

The people trading Russell 2000 are a bunch of manic depressive idiots - one minute they are much more bearish than the other indexes, next they are super bullish.