08.09.2020 – Special Report. A gigantic white whale has been chasing high-tech stocks on the stock market for weeks under the surface. In other words: A buyer with deep pockets stocked up massively. Which also explained the excellent rebound after the Corona shock. Now he was exposed – it was SoftBank. But perhaps the whale spoiled itself the stomach. We illuminate the background.
Some media still do their job really well. ZeroHedge for example. The blog had repeatedly pointed out the strange correlation that the VIX was rising, even though the stock market kept setting new records. For a long time, colleagues had suspected that only one large buyer, possibly SoftBank, was behind a buying frenzy for a few shares. Many traders had also noticed this, so they took precautions. A rise in the VIX along with new highs in tech stocks – that’s what happened when the dotcom bubble burst. We had recently pointed out this connection at this point.
SoftBank in a feeding frenzy
This was followed by confirmation from the “Financial Times”, which reported that the Japanese conglomerate was indeed the “Nasdaq whale” responsible for the rally at Big Tech. The Masa Son conglomerate had bought billions of dollars of US derivatives. In concrete terms: SoftBank ” made a splash in trading derivatives linked to some of those new investments, which has shocked market veterans. Some brokers have described the volume as the largest in 20 years. Ergo, for example, the implied vola of Apple calls rose to a new all-time high when the stock marked a new historical top.
According to the “Wall Street Journal” SoftBank spent about 4 billion dollars on call options – for Apple, but also for other tech stocks. Which, according to ZeroHedge, is ten to a hundred times the underlying because of the leverage. SoftBank also bought shares in high-tech stars such as Amazon, Google, NVidia, Tesla, Netflix and Zoom in the second quarter. A further effect of SoftBank’s call purchases: According to Goldman Sachs, many retail investors followed the big example and also entered the market for a long time.
Strange timing for the Nasdaq sellout
So is the whale full now? Who knows. It is probably no coincidence that the sell-out of the previous week was accompanied by the publication of the SoftBank story. Maybe big addresses have bet against SoftBank because they suspect that the election has overeaten itself. And maybe they let their puts on the options market be followed by stock sales. If so, the Japanese company might now have a small short problem – some calls might have exploded, maybe SoftBank needs cash. Which could result in a wave of sell-offs.
Google in sight
Especially since SoftBank may have underestimated the influence of US politics. This is likely to have played its part in the tech crash of the previous week. The “New York Times” reported that the US Department of Justice wants to file a cartel lawsuit against Google’s mother Alphabet within a few weeks. The White House wants to settle the matter before the US presidential election – the administration accuses democratic lawyers of delaying the matter.
At this point, we had already warned a while ago against breaking up Big Tech. Silicon Valley is ticking left and is in cahoots with the Democrats. During the Democratic Convention, for example, masses of critical comments on videos by Joe Biden disappeared from Google’s subsidiary Youtube. Apparently, Google also reduced the traffic to conservative news sites. Even the leftist “New York Times” stated: “Alphabet was an obvious antitrust target. Through YouTube, Google search, Google Maps and a suite of online advertising products, consumers interact with the company almost every time they search for information, watch a video, hail a ride, order delivery in an app or see an ad online. Alphabet then improves its products based on the information it gleans from every user interaction, making its technology even more dominant”.
Big Tech threatens the destruction
The next candidate would be Amazon – the online operator destroys small businesses, profits from Corona and favors a long lockdown. Just like the Democrats, who want to damage Trump with an economic slump. Ergo, appeals for a long lockdown can be read again and again in the “Washington Post”. By the way, the paper is owned by Jeff Bezos, head of Amazon. Apple, too, has gotten into the cartel’s crosshairs because of the pricing policy at App Stores – in Europe and in the USA. Moreover, the White House is not happy with production in China. This is compounded by the discrimination of right-wing opinions on Twitter or Facebook.
In short: Dinner is served. Anyone who bets on Big Tech must be prepared for a break-up. With consequences for the stock market. What SoftBank may have overlooked. The Bernstein Bank keeps an eye on the topic for you and wishes you successful trades and investments!
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