The Evolution of ETFs

 Blackrock, a leader in the ETF space, has begun to offer a target date product that gradually converts a portion of the allocation to an annuity that will provide a stable income in retirement. Some companies have adopted this product as the default option in their company-sponsored retirement plans. See article here: WSJ.

Nvidia Shorts Experience Big Losses

 After its most recent earnings report, which was strongly positive, Nvidia stock continued its significant rise. While this is favorable for traditional investors, short sellers lost over $3 billion as a result. See the article, here (Bloomberg).

0DTE (Zero Days to Expiration) Options

 The newest craze seems to be daily options. In fact, almost half of all options fall in this category. Many investors are using them in a way that resembles gambling, which has raised attention and criticism. Check on this article at WSJ.

Dollar Weighted Returns and Market Timing

Retail investors are generally poor market timers. As such, the return they actually earn (what we call dollar weighted, or asset weighted, returns) is generally much lower then the return a fund manager otherwise provides (what we would call compounded buy and hold returns). Check out this article (WSJ) for more on the return gap across different fund types and different levels of market volatility. 

Zero Day Options

 The fastest growing area in the option market  is so-called "Zero Day Options," which expire the same day they are issued. These are attractive to day traders and others looking to benefit from a quick movement in a stock's price. Surprisingly, their fast growth means that these options now represent almost 40 percent of daily option volume. See more information here (Bloomberg).

Tesla Shorts Finally Win

Over the past few years, Tesla has had a large short interest, yet the stock kept rising. However, in 2022, fortunes changed, and Tesla dropped over 60 percent, bringing a large return to the bears. See article here, Yahoo!.

Single Stock ETFs

The primary purpose of ETFs is to create easily traded baskets of underlying securities. So, why would single stock ETFs exist since investors could simply invest in the underlying security directly? The answer is that single stock ETFs are generally either levered or inverse funds. See article here, CNBC.

Index Funds Win Again

For the 12th straight year, index funds have outperformed a majority of actively managed funds. In fact, in 2021, 85% of US large-cap equity managers underperformed the S&P500. Interestingly, at the stock level, only 22% of the stocks in the S&P500 outperformed the index over the last 20 years, suggesting that a small number of stocks drive the majority of returns. See article here, Yahoo!.

Reverse Stock Split

 GE experienced some business issues that caused a significant drop in its stock price. While it has recovered some, the share price is still well below that of its competitors. Even though market cap is the more relevant measure, investors often focus on the share price. To be more comparable, GE undertook a reverse stock split. See article here, yahoo!

Supply and Demand

 Demand is outpacing supply, causing prices to rise and businesses to seek out ways to increase production. Check out this article (yahoo!).

Protecting Against Inflation

 With the large stimulus and recovering economy, inflation is a concern. Check out this article from the WSJ that provides investors with a number of approaches to offsetting the effects of inflation.

ESG Incentives

 ESG is short for Environmental, Social and Governance, and it is the hot new area in investing. Recently, some companies have actually issued debt where the interest rate is tied to how well they do on ESG factors. Check out the article here, WSJ.

Berkshire Stock Price

 Warren Buffet has decided not to split the stock price for his company, Berkshire Hathaway. As a result, the stock (Class A, BRKA) is trading over $420,000 per share. Some exchanges simply can't handle that price due to their systems. Check out the article here, WSJ.

Rotational Trading

Everything that was hot in 2020 is now cold, and vice versa. In a so-called rotational trade, activity has shifted away from stocks related to virtual activity and back to retail and face-to-face. See article here, yahoo!.

SPAC

 As an alternative to the traditional IPO process, Special Purpose Acquisition Companies (SPACs) have surged in popularity. For a primer on this frenzy, check out this article (yahoo!).

GameStop

 The story of GameStop has drawn wide media attention. The underlying drivers involve short sales, market momentum, and liquidity. For a good summary, check out this article (yahoo! finance).

A Good Year Ahead?

 Recent technical movements suggest that the market may be poised for even larger gains. Check out this article from yahoo! Finance.

Here Comes Santa Claus

 See here (yahoo! finance) for more on the so-called "Santa Claus Rally." The five trading days before Christmas, combined with the two after, are, on average, the best seven trading days of the year.

Correlation Is Not Causation

 A number of studies have looked at such items as the "Super Bowl Indicator" -- i..e, the effect on the stock market of which division's team wins the Super Bowl. Others include the impact of a Triple Crown winner in horse racing. The newest one is the returns in the market during time periods when McDonald's is selling the McRib, versus when they are not. There is a strong correlation to returns, but this is obviously not causation. See article here (Of Dollars and Data).

Tesla Splits Stock

 To make the stock more accessible to investors, Tesla is enacting a 5:1 stock split. Given that the recent share price was about $1,400, the split should reduce the stock price to under $300. This follows a similar move by Apple, which announced a 4:1 split. See article here, WSJ.