This is why the WORST stocks are the ones which are doing the best, what this means for investing, and how you can use this information to make money and invest long term – Enjoy! Add me on Instagram: GPStephan
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New data has found that, since the announce of the vaccine on November 6th, the stocks with high short interest have almost doubled the performance of stocks with low short interest….or, in other words, the stocks that MOST PEOPLE THINK are going to DROP…are the stocks that end up going up the most in price. They even go so far to say that investors have been rewarding “junk and disappointment.”
The thinking is that…MAYBE…investor expectations are SO HIGH right now, that if a company doesn’t completely blow it out of the water beyond our wildest dreams…the stock price goes down. It’s almost as though the bar was set so high…that the best possible outcome is already priced in, so once good news comes out…people begin to sell off, because what else is there to look forward to?
However…economists caution that this behavior could be a sign of something far more ominous, valuations are growingly detached from fundamentals…and, as CNN says…Market Euphoria is EVERYWHERE. Low interest rates are causing investors to search for even higher returns, and with optimism of an opening economy – there’s almost the expectation that it’s impossible to lose money anymore.
But, we should really talk about WHY this is happening in the first place…and, THEN…what you can do about it.
I think the lowering of interest rates and MASSIVE stimulus packages were necessary in keeping our economy afloat, BUT – no surprise, it threw the markets out of whack. When airlines and cruise lines receive BILLION DOLLAR bailouts…it really begins to distort the market in terms of how much the company should be valued, or where it should trade at.
With low interest rates, people are encouraged to borrow more money…and, frankly, I think this is fairly normal, and IT CAN BE DONE responsibly…but, many people forget the risks that you are literally borrowing money to buy an investment, that could go down in value.
Third, Why The Works Stocks Are Doing The Best.
Right now, I think a LOT of people are looking for the next big opportunity. We’ve seen companies like Zoom 5X in price…and with the economy reopening, there’s the expectation that REALLY hard hit companies, with REALLY poor financials, that everyone seems to have overlooked…will eventually start doing better.
Fourth, Meme Stocks.
This is a BRAND NEW type of investor, who doesn’t trade on fundamentals, or technical analysis, or news…but, instead…they just trade on momentum and excitement. It seems like every other week, there’s another ‘new’ stock that people begin talking about online…people pile in…drive up the price, and then it comes crashing back down as soon as everyone moves on to the next thing.
Attention, RIGHT NOW, is moving the markets…and more than ever, investors are growing impatient when nothing happens.
And Sixth: there’s absolutely the Gamification of stocks.
I’ve been saying this throughout ALL of last year, but lately – it’s seems to me like the line is REALLY getting blurred between investing…and gambling. And in a market where it seems like EVERYTHING KEEPS GOING UP, it’s going to reinforce that investing is EASY, and anything below a 20% return in a month is BAD.
That’s led to this new psychology that people may as well take the risk with REALLY POOR PERFORMING COMPANIES, because they have WAY more upside than something that’s already at its all time high by A LOT. But, I will say this: just because this can work now, doesn’t mean it always will…and, none of it is sustainable.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com
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