Dear Reader,
The US election has been called for Joe Biden. However, Donald Trump wants to take legal steps to fight the result, because he claims to have found evidence of fraud.
If it turns out there is any truth to this, it could have disastrous consequences for American democracy and society. And then there's the situation with the Senate.
The stock markets are in a celebratory mood. Wall Street is on its way to new record heights. At the same time, though, technical analysts aren't quite as optimistic as they seem, and this outward euphoria lies against a volatile backdrop.
Will Biden make everything okay?
One of investors' biggest worries before the election, besides the 2021 stimulus package, was that President-Elect Biden could plan to re-raise the taxes that Trump had lowered during his term.
This is no longer considered a risk, since the election results were not as much of a liberal landslide as had been predicted. Some had expected a 15% lead. Maybe these election predictors should check their algorithms? They were also wrong about the 2016 elections between Clinton and Trump.
Why should a narrow election protect from tax increases, though? Well, because it is not yet clear which party will control the Senate next year.
Out of 100 seats, 95 are currently filled. The Democrats have 47, the Republicans 48. That means the Democrats need at least 3 of the remaining 5 seats—in the case of a tie, Vice President Kamala Harris has the deciding vote.
If the Republicans maintain their majority, it will be difficult for Biden (once he's been inaugurated on January 20th, 2021) to get anything done. So some things are not yet clear.
Amazon: massive insider trading
Here's another interesting aspect of the current market situation, which I stumbled upon over the weekend. American listed corporations have to report more than just their 3 quarterly reports and yearly balance to the Securities Exchange Commission (SEC). They also have to disclose all corporate actions, including any insider transactions. These are then visible to anyone online.
The SEC has a report showing that Amazon CEO Jeff Bezos sold a huge amount of his own shares between Monday and Wednesday of the week before last—9.88 million shares!
If you assume an average of 3,097 USD per share, that is a total of 30.6 billion dollars. Jeffrey Wilke and Andrew Jassy, CEOs of Amazon Worldwide Business and Amazon Web Services respectively, also sold shares on the Monday before the election. Wilke sold 2,000 of his shares, and Jassy sold 6,945.
This raises the question: Does the head of Amazon have access to information not yet available to the public?
Optimism is bubbling over again
I often use the put/call ratio for analysis, because it does a good job of reflecting the current mood of investors.
If the ratio is 1, the same number of calls and puts are open. Values over 1 signal that more puts are being bought, and vice versa.
A put/call ratio of 0.5 means that twice as many calls have been opened as puts. This signals that investors are hugely optimistic.
This was the situation on the Friday before last.
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