by Jason Bodner
October 20, 2020
Major League Baseball playoffs are peaking. The Tampa Bay Rays start the World Series (against the L.A. Dodgers) tonight following hockey’s Tampa Bay Lightning Stanley Cup victory September 28th.
Baseball games evoke that old song: “Take me out to the ballgame, take me out with the crowd…”
That familiar old anthem conjures good vibes of bat-swingers in front of their childhood worshipers, but the composers of that 1908 song – Jack Norworth (words) and Albert Von Tilzer (music) – had never been to a baseball game and didn’t see a live game until 1940. Even more interesting, Norworth penned the lyrics as a feminist anthem about a woman wanting to see a baseball game instead of a night at a musical club. The girl he originally had in mind was his girlfriend, Trixie Friganza, a strong feminist.
As this photo indicates, baseball games in the early 20th Century were a predominantly male gathering.
Nearly everyone knows the chorus of this song, but the little-known verse hints at the real story:
Katie Casey was baseball mad,
Had the fever and had it bad
Just to root for the hometown crew
Ev’ry sou… Katie blew
On Saturday, her young beau
Called to …take her to a show
But Miss Kate said ‘No!
I’ll tell you what you can do…’
Take Me Out to The Ball Game.
Take me out with the Crowd
Buy some peanuts and Cracker Jack
I don’t care if I never get back….
The song’s surprising history is another example of norms being redefined over time. Humans tend to quickly latch onto the familiar and assume it is the norm. To me, it’s no different in the world of stocks.
Long ago, investors knew that Big Money moved the markets. “Operators,” as they were called then, could sling around huge amounts of money on leverage and impact stocks at will. Back in the 1920s, it was perfectly legal to spread misinformation; you could even pay reporters to print false stories to influence prices. There were bull and bear “raids,” where groups of traders (cronies) would puff up stock prices only to trap everyday investors by unloading those stocks onto them as prices melted lower.
It was a Big Money man’s game then, but over time the market became regulated and it nicely served the purposes of those regulators to perpetuate the perception that anyone can make money in stocks. After all, the big players needed an ever-revolving door of new and active traders to manipulate and beat up on!
Through the 1980s and 1990s, stocks became an “everyman’s game.” Day-trading sparked the dream of taking a small grubstake and turning it into millions. By the 2000s, anyone with $5,000 could open up a brokerage account to trade stocks globally. Today we have several commission-free online brokers which give literally anyone instantaneous access to stock trading for “free” on their mobile phones.
Therefore, the perception may now be that Big Money is just a quiet gentle whale in a huge sea of aggressive little fish. Don’t bother them, and they won’t bother you. And if you’re lucky enough to spot such a whale, you look at them with curiosity, but beyond that, you figure they don’t really impact you.
Well, I’m here to tell you that couldn’t be further from the truth. Big Money is what really moves markets – and it’s here to stay. They are quite content to remain out of the limelight. That way they can operate freely and below the radar. Algorithms and big institutional brokers (like the ones I used to work for) are today’s cloaking tools for the actions of Big Money accounts.
But like Sherlock Holmes was able to find the truth by looking at clues in a different way, if you know what to look for, Big Money is there in plain sight, and it is influencing prices perhaps more than ever.
Three years ago, J.P. Morgan estimated that just 10% of stock market trading volumes are regular stock picking. But most media – and more importantly, their broker-advertisers – would have you believe that the bulk of small investors are in control. We know the truth: Logically, if you want to know what drives markets, or more importantly where they may be headed, you need to focus on what Big Money is doing.
In September, Big Money was selling, and that was consistent with expectations. Remember, in every election year since 1992, Big Money accounts reduced risk by selling going into an election, and they increased risk by buying right after, so when markets softened in September it seemed right on schedule.
It appears that during this election, buyers have returned early; at least for now. To me this indicates that Big Money is more certain of the pending outcome. Remember, when you manage huge money, you don’t like uncertainty, so you reduce risk. Increasing risk indicates confidence and certainty.
Last week, I told you that nearly every sector was being bought. General buying suddenly slowed, but we saw big buying in Industrials, Financials, and Utilities. These are the less exciting groups. Financial stocks kick off reporting earnings most cycles, but I’d rather see growth buying in tech and discretionary
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Just because buying is back doesn’t mean volatility is over. Assume for a moment that Big Money is assuming that Joe Biden will win this election, but as we witnessed in 2016, Clinton was the assumed winner and Trump shocked the world. Now we have a lull in uncertainty and volatility that may not last.
There is one thing I am sure of: If you can identify Big Money buying in the best quality stocks, you will have an edge. If there is a market drawdown, these are the stocks to be ready to buy. Despite the rags to riches dreams being sold to you, these “whales” still drive markets. And they move with the most confidence that money – their money – can buy. It makes sense to place your bets alongside them.
The game of stocks is exciting, but don’t think that because Big Money prefers anonymity that it’s not the major driver, because it is. Big Money plays hard ball. If you know this and understand how to use it to your advantage, you’ll confidently join in the game, singing: “Take me out to the ball game.”