Transcript:
Tom Vaughan:
Hello everybody, welcome to Tuesday. The S&P 500 was up .17% today. Dow was up, NASDAQ was down. I’d like to talk about the NASDAQ because it’s really interesting what’s happening, and so is down again, you know, yesterday and today, and has been on a really good tear for the past five or six weeks. Lots of news stories about it, because it’s the big area, it’s the Apple’s, it’s the big companies, the tech companies and what have you. And what has happened, you know, the stories have been whether it’s down because interest rates are up on the 10 year treasury, it’s down because the oil is up. Well, interest rates and oil were going up over the last five or six weeks, and the NASDAQ did really well.
I personally think it’s more of an issue of what’s happening with the individual investor. I think that they’re on vacation this week. And what’s left are the institutional investors who are more value oriented, in my opinion, and looking at some of these other stocks. The individual investors really excited about the tech stocks and the small tech stocks, the future technology, those types of things. And so when they go on vacation, you might see some pullback. And one of the things that they’re doing, that’s very interesting.
First of all, there’s a lot of them, it was a huge growth in individual investors last year, because people didn’t have anything else to do. And so one of the things that went on there was that they started to buy call options. So if I wanted to buy 100 shares of Apple, for example, I pay $1,600. If I want to buy a call for the same number of shares, and I want it to expire in a month, I only pay $86. If I wanted to expire, just you know, next Friday, it would be only $29. So it’s a cheaper way of having some control of that particular stock. And so that call might have been at $175, the current price is at $160, and if the current price goes up, the option price goes up and they could sell it you know, before it expires. And that’s how they make their money.
But the big impact that they have is that when they buy those call options, the big companies like Schwab and TD Ameritrade and fidelity and RobinHood, they have to buy shares, in this case in Apple in order to cover those calls that are being purchased. And so they’re having this huge impact on certain segments of the market. And so what I saw last year was during the holidays, we saw those segments kind of slow down, and then all of a sudden pick up again after so it’ll be really interesting to see what happens on Monday, and certainly what happens at the beginning of the year, because we saw a really good run at the beginning of the year, last year, after having some softness during the holidays in those areas.
So, I think this will be kind of fascinating, see how this plays out. Just a hunch that I have, we’ll see if it works or not. But if it’s true, it’s something that you know, theoretically, in these holiday periods, you could actually be purchasing some of these good growth stocks as they are coming down just due to the softness, waiting for that individual investor to come back with their call options and driving the price back up. So just kind of an interesting thing, as far as that goes. So that’s why we bought Apple yesterday, as you know, in a lot of our IRA accounts, it was actually up today. So but really, you know, that’s an area that I think will be pretty popular coming forward. Look forward to seeing what’s going to happen tomorrow. Thank you very much.