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Felix Prehn - 5 Reasons to Buy THIS Now [before Big Banks do] + Stock Market News 30 August 2024 · Felix Nikolas Prehn's Podcast

• 0:00
  Speaker 1: Into this pre-market life and after I've absorbed some electrolytes, I'm sure I promise you that's what that is, not some other white substance that bankers are known to take.
• 0:10
  Speaker 1: We don't do that sort of thing around here.
• 0:12
  Speaker 1: I'm going to walk you through the five reasons why I am bullish for the moment and I'm going to go straight into that.
• 0:21
  Speaker 1: And I'm going to go straight into that.
• 0:29
  Speaker 1: Now let me share my screen with you here and you will see.
• 0:32
  Speaker 1: We just got out inflation data Pretty important numbers, because this is the Fed's favorite inflation metric, which is a bit weird, right, it's a bit like having a favorite child.
• 0:43
  Speaker 1: People don't normally admit to that sort of thing, but it is of weird, right, it's a bit like having a favorite child.
• 0:53
  Speaker 1: People don't normally admit to that sort of thing, but it is, of course, true.
• 0:55
  Speaker 1: And core PCE, which is what the Fed looks at, came in at 0.2.
• 0:57
  Speaker 1: It was expected to be 0.2.
• 0:58
  Speaker 1: Last month it was 0.2.
• 0:58
  Speaker 1: So, yay, right, inflation is calm, it's flat, nothing unusual happening there.
• 1:02
  Speaker 1: Personal income was expected to 0.2.
• 1:05
  Speaker 1: It's coming a little bit higher, but only a little bit higher.
• 1:09
  Speaker 1: I quite like it because it gives the soft landing.
• 1:13
  Speaker 1: Economy is strong, sort of la-la land type thinking some more data, personal spending.
• 1:20
  Speaker 1: Remember.
• 1:21
  Speaker 1: The US consumer is broke and bankrupt and is about to jump off the nearest bridge.
• 1:26
  Speaker 1: Well, not so fast.
• 1:28
  Speaker 1: Apparently we got a 0.5 increase in personal spending, basically as expected, which is again what we want to see.
• 1:37
  Speaker 1: And then the rest is pretty much just the same thing.
• 1:39
  Speaker 1: So pce is at 2.5.
• 1:41
  Speaker 1: That's the lower end of expectations.
• 1:44
  Speaker 1: So what does that mean?
• 1:45
  Speaker 1: It just means happy people.
• 1:48
  Speaker 1: Happy people are all around us.
• 1:51
  Speaker 1: When the data first came out, the market spooked slightly, I think, by the relatively high personal spending and people were thinking well, maybe they won't cut rates, but if you think this through, you want lower rates.
• 2:00
  Speaker 1: You want strong spending.
• 2:02
  Speaker 1: Everything is absolutely perfect in the us.
• 2:05
  Speaker 1: Yes, absolutely, vote for me.
• 2:09
  Speaker 1: And then here is reason numero two.
• 2:13
  Speaker 1: Second reason we are very, very bullish this morning.
• 2:16
  Speaker 1: And what is it?
• 2:16
  Speaker 1: Apple and nvidia are apparently going to invest in OpenAI.
• 2:23
  Speaker 1: Now why the heck would Microsoft, who own 49% of OpenAI, let the buggers from Apple and Nvidia in on the party?
• 2:36
  Speaker 1: Because if you own 49% and you manage to basically rejig the entire management as you wanted, it's pretty easy to argue for regulators that you actually own the thing, and therefore I think they'd be quite happy to be diluted a little bit.
• 2:54
  Speaker 1: It's going to value OpenAI at the small sum of $100 billion, which is good, right.
• 3:02
  Speaker 1: It keeps the AI party alive and Apple and Nvidia have got plenty of free cash lying about.
• 3:07
  Speaker 1: They're not going to notice it.
• 3:09
  Speaker 1: Microsoft's share is going to drop somewhat, which is good for Microsoft.
• 3:13
  Speaker 1: They can say directly look, we're not a monopoly.
• 3:16
  Speaker 1: Apple and Nvidia are in on this.
• 3:18
  Speaker 1: They're two very large companies.
• 3:19
  Speaker 1: You see, everything is fine here.
• 3:21
  Speaker 1: Move away, you know, go and do something else.
• 3:24
  Speaker 1: Pre-thinker says hit the like button or Felix will make fun of you.
• 3:33
  Speaker 1: He will Indeed 550 people watching 87 likes, which means we've got 470 very, very mean people watching this.
• 3:41
  Speaker 1: So here is reason number three why I'm bullish this morning and I'm in a rather chirpy mood today.
• 3:48
  Speaker 1: I had a nap today, which is always a good thing.
• 3:50
  Speaker 1: Honestly, an afternoon nap, there is nothing quite like it.
• 3:53
  Speaker 1: It's just one of those things you give up as a child, but if you have the time to do that as an adult, it just does something to you, especially when you have a kitten sleeping on your chest when you wake up, which is very nice.
• 4:04
  Speaker 1: Anyway, asset managers are the least tech invested least tech invested since November 2023.
• 4:11
  Speaker 1: We're here and that's pretty low exposure, but basically where we were in 2023.
• 4:18
  Speaker 1: What does that mean?
• 4:18
  Speaker 1: Well, it's fairly likely that they will go up.
• 4:22
  Speaker 1: If the market keeps lifting up as it appears to be this morning, then all 470 people are not logged into YouTube, says Jimmy.
• 4:29
  Speaker 1: Yes, that is true, that is true.
• 4:31
  Speaker 1: It seems some weird change that YouTube only allows you to hit the button if you're logged in, but we've got 170 likes now, so it does work.
• 4:39
  Speaker 1: Calling people freeloaders and ungrateful bastards for not hitting the like buttons seems to be incredibly effective.
• 4:46
  Speaker 1: You'd think it alienates viewers, but for some reason it doesn't.
• 4:50
  Speaker 1: Everybody likes to get slapped around a little bit, apparently on this channel, so that's positive.
• 4:56
  Speaker 1: Positioning is basically low.
• 4:57
  Speaker 1: And here is reason number four CTAs.
• 5:02
  Speaker 1: My favorite friends, my algo funds, my computers.
• 5:06
  Speaker 1: You know the kind of people who don't talk back at you.
• 5:07
  Speaker 1: They just do their own thing.
• 5:09
  Speaker 1: They are.
• 5:10
  Speaker 1: It's a little complicated, but essentially it's got something to do with volatility and they're basically going to have to buy.
• 5:16
  Speaker 1: So pretty much a flat market.
• 5:19
  Speaker 1: They're going to buy $5 billion.
• 5:20
  Speaker 1: Today.
• 5:21
  Speaker 1: We go up half a point.
• 5:22
  Speaker 1: They buy $4 billion.
• 5:23
  Speaker 1: We go up 1%.
• 5:24
  Speaker 1: They go up by $3 billion.
• 5:25
  Speaker 1: So they are basically supportive.
• 5:27
  Speaker 1: And guess what?
• 5:28
  Speaker 1: If we go down half a point, they're still buying $4 billion.
• 5:33
  Speaker 1: So they're just very, very supportive to keep us in this kind of range where we're trading right now.
• 5:38
  Speaker 1: So very, very good news, right?
• 5:47
  Speaker 1: Stability, yay.
• 5:48
  Speaker 1: Speaking of stability, I know our trading portfolio seems to be stuck permanently at an literally 80% gain, and you might be thinking, felix, why is it never going up?
• 5:54
  Speaker 1: Well, I'll show you why.
• 5:55
  Speaker 1: Let me show you why.
• 5:57
  Speaker 1: Here is our teaching portfolio.
• 6:00
  Speaker 1: You see this here, that $8,000 of unrealized profits.
• 6:05
  Speaker 1: I don't really want to close the trades yet.
• 6:08
  Speaker 1: I might actually close one of them today.
• 6:11
  Speaker 1: There's one that I have my eyes on closing out, which would then take us above the 80%.
• 6:15
  Speaker 1: But yeah, with that $8,000 on top, we'd be well over 100%.
• 6:20
  Speaker 1: So if you want to learn, or if you're just curious how we do that, then come and join me next week, phoenixfriendsorg.
• 6:26
  Speaker 1: I'll teach it to you.
• 6:27
  Speaker 1: It'll take about 90 minutes, it'll be pain free, it's for beginners, you don't need to know a thing.
• 6:31
  Speaker 1: You just need to arrive with a cup of something warm and a notepad and an open mind, and then we'll have some fun and it's part of our mission to make a million people financially free.
• 6:43
  Speaker 1: That's really my goal with this whole channel.
• 6:49
  Speaker 1: Julie, thank you for not identifying as a freeholder, a freeloader, rather Freeholder.
• 6:54
  Speaker 1: It's funny.
• 6:55
  Speaker 1: Do you have freehold in the US?
• 6:56
  Speaker 1: You don't really have.
• 6:57
  Speaker 1: You don't have leaseholder in the US, do you, where somebody sort of owns the land and you build on it?
• 7:02
  Speaker 1: I don't think that's really a thing in the US.
• 7:03
  Speaker 1: I think that's a bit of a British thing.
• 7:05
  Speaker 1: Anyway, this is reason number five, and I thought two or three times about whether I should include it, because it's a little complicated and people always say to me Felix, you got to make it simple, otherwise nobody wants to watch you.
• 7:17
  Speaker 1: And I'm like, yeah, but there seems to be a special breed who doesn't mind a little bit of complexity.
• 7:23
  Speaker 1: So this is a screenshot from from Trade Vision, which is this where is it here, this lovely little software, tradevisionio?
• 7:32
  Speaker 1: We call it smart money.
• 7:34
  Speaker 1: We might actually rename it, but at the moment it's called smart money and you can get yourself a one-month trial to play around with it.
• 7:41
  Speaker 1: And what is it showing to you?
• 7:43
  Speaker 1: Well, it's saying that a lot of bullish trades here on Nvidia, and these are all from yesterday.
• 7:49
  Speaker 1: We see these live.
• 7:50
  Speaker 1: These are dark pool trades and they're pretty big trades, right?
• 7:53
  Speaker 1: Look at that.
• 7:53
  Speaker 1: Look at the millions.
• 7:54
  Speaker 1: They're all millions, millions of dollars, millions of dollars, lots of millions, lots of wealthy people about their funds, basically.
• 8:01
  Speaker 1: And what have they all done?
• 8:02
  Speaker 1: Well, they've all sold put options.
• 8:04
  Speaker 1: You see, sell, sell, sell, sell, sell, sell, sell all of them.
• 8:07
  Speaker 1: Now what happens when large amounts of put options get sold and if you understand this, you are in a very, very thin stratosphere of people who actually understand Nobody understands this.
• 8:19
  Speaker 1: So if I explain it to you and it doesn't make complete sense, it's okay.
• 8:22
  Speaker 1: Maybe take a screenshot of it after.
• 8:24
  Speaker 1: I'll zoom out.
• 8:24
  Speaker 1: You can take a screenshot in just a second.
• 8:27
  Speaker 1: So you start off with a large number of put options.
• 8:34
  Speaker 1: And why do you have those?
• 8:36
  Speaker 1: Because people were worried about the NVIDIA earnings, somewhat rightfully so.
• 8:39
  Speaker 1: They buy put options as insurance.
• 8:41
  Speaker 1: Lots of people get put insurance.
• 8:44
  Speaker 1: Now what then happens is that investors decide to close their put positions, which is precisely what we're seeing here, because lots of them are selling the puts that they set up the day before, like literally probably $100 million plus easily.
• 9:00
  Speaker 1: I haven't added this up.
• 9:01
  Speaker 1: That's quite a lot of money.
• 9:02
  Speaker 1: And what happens then?
• 9:03
  Speaker 1: Well, what most people don't realize is, with an options trade and just bear with me for a moment there is a market maker on the other side of that trade.
• 9:13
  Speaker 1: So people sometimes say oh, felix, trading is a zero-sum game.
• 9:16
  Speaker 1: You make money, someone else loses money.
• 9:18
  Speaker 1: It's not true.
• 9:19
  Speaker 1: What happens is that there is somebody on the other side who takes no risk.
• 9:24
  Speaker 1: They're called a market maker.
• 9:25
  Speaker 1: I've got three of them literally on our coaching team.
• 9:27
  Speaker 1: These are people who really understand how the market works because they only make money out of that sort of bid-ask spread.
• 9:33
  Speaker 1: You know the two little prices you see inside your broker.
• 9:35
  Speaker 1: So what happens is that investors close their positions.
• 9:39
  Speaker 1: The market makers have to buy back the put options.
• 9:43
  Speaker 1: So they are basically the ones on the other side of that trade, so they're buying them back.
• 9:50
  Speaker 1: Now what happens when you own a put option and I appreciate this is a little complex You're basically short the stock.
• 10:00
  Speaker 1: The put option is betting on it to go down right, so you're kind of negative.
• 10:05
  Speaker 1: On the stock Market, makers don't take directional positions, they just make money out of margin.
• 10:12
  Speaker 1: They don't care whether the market is up or down or sideways or round and round and round and round she goes.
• 10:17
  Speaker 1: So what are they going to do?
• 10:17
  Speaker 1: They need to adjust their hedges.
• 10:19
  Speaker 1: What are their hedges?
• 10:21
  Speaker 1: Their hedges is the actual stock.
• 10:22
  Speaker 1: So what they have to do is they have to buy the stock and that offsets the short position they have from having to buy back the put option.
• 10:31
  Speaker 1: A little complex, I know, but it's very, very important.
• 10:35
  Speaker 1: Because what happens if the market makers, you know you sell $100 million of options, of put options?
• 10:41
  Speaker 1: The market maker buys the equivalent of stock.
• 10:43
  Speaker 1: That means there is more buying pressure on the stock, the stock price rises.
• 10:51
  Speaker 1: And what happens when the stock price rises?
• 10:53
  Speaker 1: Well, more investors are going to decide to close their put positions because they're losing money.
• 10:59
  Speaker 1: So you get into this kind of circle and maybe you want to take a screenshot of this and run through this a few times because I appreciate it.
• 11:06
  Speaker 1: It's not intuitive.
• 11:07
  Speaker 1: It is not intuitive to anybody.
• 11:08
  Speaker 1: It wasn't intuitive to me either.
• 11:10
  Speaker 1: Nick says we like the battle faulty approach to bloody freeloaders.
• 11:16
  Speaker 1: Yes, um, and if you realized that I was german, I would probably ruin the whole thing, wouldn't it?
• 11:20
  Speaker 1: Yeah, I know, um, the brits just left the building in in, you know, in unison, marching out with a with a hand stretched out, which I would do, but it's actually a criminal offense in germany, not that I'm there.
• 11:32
  Speaker 1: But so this, essentially, is very important and it's what helps to drive a stock like Nvidia up today.
• 11:39
  Speaker 1: And if you understand that, you understand that on big events like Fed events or big earnings events, the best thing to do often is to just wait for the earnings to come in, set up a certain kind of trade that benefits from the stock going up and from volatility falling, and you've got a pretty sweet deal.
• 12:03
  Speaker 1: But that's maybe a little bit too much for today to go through.
• 12:07
  Speaker 1: So, yeah, that was reason number five, and I guess this is reason number five B, and I guess there's a reason number five beep, let's call it six, shall we?
• 12:20
  Speaker 1: And we still are going to get six and a half billion dollars in daily buybacks until the 13th of the month.
• 12:25
  Speaker 1: So we get 10 more days of buyback support and then the buybacks basically collapse.
• 12:31
  Speaker 1: That happens every earnings season.
• 12:33
  Speaker 1: It's a seasonal thing, again and again and again.
• 12:35
  Speaker 1: But don't wait until the 13th of the month.
• 12:41
  Speaker 1: The market is a forward looking beast.
• 12:43
  Speaker 1: I'm telling you this.
• 12:44
  Speaker 1: Wall Street knows it.
• 12:45
  Speaker 1: Fund managers know this.
• 12:47
  Speaker 1: Their brokers are telling them that, ok, most retail investors haven't got a freaking clue, but then they're not all as smart as you and watching us here, so we maybe have another week of support from the buybacks and then it disappears.
• 12:58
  Speaker 1: So that's something to bear in mind, that there is an expiration to this particular piece of good news and this is probably not a good piece of news, but again, I want you to understand it.
• 13:10
  Speaker 1: So this is not good.
• 13:15
  Speaker 1: The second half of September is historically not good.
• 13:19
  Speaker 1: One reason is buybacks go away and another reason is just seasonality Big funds prepare for their taxes and so on.
• 13:33
  Speaker 1: There might be some adjustments going on there, but yeah, that's something to bear in mind.
• 13:37
  Speaker 1: Second half of September typically not good.
• 13:40
  Speaker 1: So how do we make money out of that?
• 13:41
  Speaker 1: Well, I might be looking at another trade, and I know we're going all in today, aren't we?
• 13:48
  Speaker 1: On the complexity of the world, nothing held back.
• 13:52
  Speaker 1: Today.
• 13:52
  Speaker 1: We're looking at the VIX, the fear index, and it's trading right now at 1548, which is pretty good, and I might set up another trade on that going up, because that goes up when the market goes down.
• 14:07
  Speaker 1: So it's a nice little hedge that we can get into.
• 14:10
  Speaker 1: Again.
• 14:11
  Speaker 1: You want to understand how that works before you attempt such a daring investment or trade, rather.
• 14:17
  Speaker 1: And then this was out in Bloomberg today Bank stocks are set for a strong rally as the Fed prepares to ease rates, says Wells Fargo's Mike Mayo.
• 14:27
  Speaker 1: Maybe he's got some stock options and he'd like that to be true, but I agree with him on that.
• 14:32
  Speaker 1: Generally speaking, it's just a bit baffling that buffett, you know the warren is um warren b is selling a lot of bank of america.
• 14:43
  Speaker 1: So I think you gotta factor the commercial real estate crisis, uh, into this and be a little bit selective.
• 14:54
  Speaker 1: The only stock that I trade at the moment bullish is Morgan Stanley and JP Morgan.
• 15:01
  Speaker 1: Again, that's not a trade recommendation in any way, shape or form, but just because their commercial real estate exposure is not that big a deal.