August 17, 2022

Big Little Things

Never underestimate the big importance of small things.  

It’s a line from a book called The Midnight Library that we listened to while driving from Steamboat Springs to Austin this week.  The character in the book who uses it in turn got it from Henry David Thoreau, who said, “The little things in life are as interesting as the big ones.”

Illustration 37902156 / Choices © Alain Lacroix | Dreamstime.com

It’s a thought-provoking and clever novel. So there’s our book recommendation.

The big little thing this week in the stock market is options-expirations. And the big little thing for investor-relations professionals – and CNBC commentators – is 13Fs are out.

Options-expirations though gets little attention from observers. Brian Sullivan and I talked about it some months ago, but otherwise it goes largely unnoticed, this big thing.

The stock market bottomed powerfully – at least the way we measure the data – at June options-expirations.

July expirations dropped the hammer on the Growth trade. For Tech stocks it was like that Ludicrous Mode button in the Tesla Plaid.  Explosive.

This week those instruments that set the market on fire are done. The market cannot sustainably rise without Tech.  And it didn’t. Then Tech took off with one little thing: Leverage from derivatives.

I’m not saying it’ll end this week or with new options trading Monday Aug 22. But it sure won’t surprise me. I can give you a list of data points that signal it.

It’s not a little thing.  But people treat it that way and underestimate the big importance.

But 13Fs? Surely I’m not suggesting these are little things.  (For you few wondering what I’m talking about, it’s the quarterly report on shareholdings derived from Section 13f of the Securities Exchange Act, added in 1975.)

Well, in the sense that if you add up the puts and takes each quarter and get a net number for ownership change, it is. You’ll find it’s about two or three days of trading volume.

And there are 67 trading days in each quarter.

Think about what’s happened in 2022 so far.  Worst half-year in a half-century for stocks. Most consecutive market declines in roughly 100 years. Record-high Short Volume. Volatility over 3% daily for much of the year in S&P 500 stocks. Pandemic winners down 80%.

It’s been dramatic. Executive teams have longed for guidance.

Without giving away the punchline of The Midnight Library, it’s about choices.  One small choice can  change the outcome of one’s life. Paraphrasing David Thoreau, every small decision is interesting.  We could choose to say hi to the stranger passing us, or not. What if your one act of kindness altered that person’s view of life?

Pick your small thing.  I’ll let you read the book.

Now, let’s apply it to investor-relations for public companies and our role as givers of guidance, doers of little things.  We have no idea, really, if the June 30 13Fs reflect what institutions own now (settlement data won’t close that gap – they catch about 5% of trading volume, folks).

It’s just what we’ve always done, since 1975.

You have a chance to change that cadence, with a decision, guidance. Both things are happening this week. Will your CEO know about both? And which is likely to affect the stock market more? 

Suppose you decided to tell your c-suite at June expirations that Demand for stocks had plunged to the same level measured in Mar 2020, and Short Volume (not Short Interest, which is even older than the 47-year-old 13Fs) was at a record 49.4% of S&P 500 trading volume.  In Mar 2020, the same conditions marked a bottom.

That’s just a little thing. But wow. What a difference.  It might change the way your executive team and Board think about the stock market. And what drives it.

The beautiful thing about decisions is that they’re ours. We’re not forced into them. Every day is a chance to choose to DO SOMETHING DIFFERENT.

Which could lead to the next little thing.  What about moving your earnings date outside the options-expirations period?  What about sending your c-suite a weekly pie chart reflecting 100% of the money behind price and volume?

What about measuring Active money as a constituency before you report results, and again a week afterward, and sharing how it changed – and what that means?

These are all little things of very big importance – that are vastly more interesting than waiting for the 13Fs 45 days after the quarter ends. At a point that’s meaningless versus what the market has done.

I’m not saying don’t use 13Fs. But they’re backward-looking and incomplete and offer no explanation about the behaviors that have exploded and prevailed since 1975. And you can be giving little metrics every week, every day even.

The little things can be what makes a bigtime difference.

Yes, I was philosophically moved by the book!  And sure, I think public companies should be measuring all the money, all the time. 

But it’s invigorating too, to know you can choose to do something new, something different, every day.  If you’re intrigued, holler.  We’ll help.

And if not, give the book a read.  It might change the way you think about life.

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