🔒 Alec Hogg: US tech stock run threatened by super punter Son

After a 6.4% reverse in US tech stocks last Thursday and Friday (see chart below) long-time Bears are calling the end of the Bull Run. Again. We’ll get closer to finding out if they’re right this time when New York markets re-open this evening after yesterday’s Labour Day break.

Rumours of heavy betting in tech stocks via single stock call options have been circulating for a while. It didn’t make sense to professional investors that the surge in tech stocks had been driven by RobinHood tapping small punters. Over the weekend evidence emerged the options talk wasn’t cheap – Japanese-based SoftBank has taken big, highly leveraged bets in stocks like Amazon, Apple, Alphabet, Facebook and Tesla.

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Private equity player SoftBank’s fortune was made through a Naspers-like early stage investment in what is now Chinese internet giant Ali Baba. That was followed by investments into other early stage new economy companies. After its recent creation of a fund to invest in tech stocks, SoftBank took a reported $4-billion position buying call options on the equivalent of $50-billion worth of Nasdaq listed equities. Such a large, highly geared bet introduces fresh risk into an already heated market. So after it was exposed, many traders scurried for cover. 

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On Monday, Tokyo-listed SoftBank shares lost 7%. But they stabilised this morning, down only 1%, suggesting the tempest has passed. Rational minds know SoftBank’s eccentric founder, chairman and CEO Masayoshi Son also controls a $100-billion “Vision Fund” which has tens of billions in free cash. It’s going to take a lot more than a couple days of single digit declines in his favourite stocks to blow up the Son Machine – or the tech market as a whole.

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