In this episode of Truth or Skepticism, Tom and Dylan talk about put/call ratios, market extremes in the U.S. and Chinese stock markets, income inequality and other hot topics from the news of the week.

The Significance Of Extreme Put/Call Ratios 

Dylan brings up the fact that it’s been seven years since the put/call ratio has been this high. This has traditionally been interpreted that the market is going higher, but right now there are more puts trading than calls, revealing a bearish market sentiment.

Here’s a snapshot of Tom’s view on the high put/call ratios...

The put/call ratio never meant anything to anyone of us who traded professionally. Puts are less than 40 years old as a financial instrument. They are in their infancy. In the last forty years, all of these products have of course, transformed over time. Selling puts has become an asset class. You used to have to buy puts in order to protect yourself from the you just buy volatility. So it’s a very different measure right now.
— Tom Sosnoff

At a Glance: Chinese Markets

As for what's happening in China, here are a few quick stats about China’s stock market that were thrown out during the discussion:

  • China’s market is up 80%.
  • Leverage in the Chinese stock market is up 4 times (from $60 billion to $240 billion).
  • $70 billion in new accounts have been opened since the New Year ($30 billion in new accounts since Chinese New Year).
  • Most new Chinese account owners are millennials.
  • All of them are making more money than anyone in the U.S. due to leverage.

'China’s Bubble Is Great For Opportunists'

You mentioned 7.5 million people have opened brokerage accounts since January 1st. Four million people have opened brokerage accounts in the month of March alone. Sophisticated or non-sophisticated?

99.99% are unsophisticated, because they haven’t experienced anything besides this surge in prices. This demographic is young. We haven’t been able to get the millennials to be interested in finance in America.
— Tom Sosnoff

Tom believes that once new traders in China get a taste for the stock market (up or down), they will want more and more. They will come back after the bubble bursts.

Tom described the Chinese culture as "Cowboy Culture", meaning a culture of entrepreneurial, hungry, daring individuals, eager and raring to go.

Income Inequality - Busting Myths

Dylan breaks down what he believes are some myths about income inequality.

Since 2000, capital custodians have let people borrow money at 0% interest, in order to boost the economy. Capital goes from the short-term market, to long-term market. It creates a capital drought in the enterprise market - businesses that are growing can’t get the money that they need. The byproduct of all of this is income inequality - increasing a small number of individuals in the world who are getting custody of all the capital in the world.
— Dylan Ratigan

Tom responds with the sentiment that it’s all opportunity for traders. He suggests we use the mentality that everything (everything!) is an opportunity to trade in the market, including the fact that more people around the world are entering the market.

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