True, we do not trade Japan that often nowadays and focus is mostly elsewhere. However, when Team Kolanovic goes this “conviction directional” on a mega-cap index one needs to pay attention.
“Our equity strategists are forecasting Japanese stocks to break out above the current range on the grounds of improving earnings forecasts, a stabilizing domestic political situation, approval of COVID-19 vaccines and relatively light positioning. A key catalyst in the near term is a snap election. If a snap election is called for before year-end and the LDP secures a victory, we believe speculation of a long and stable administration would likely be positive for Japanese stocks. In contrast to this view, we believe the options market is considerably underpricing the potential upside returns on Japanese stocks. As a result, we recommend investors buy Nikkei Sep21 110% calls to position for a breakout. Dealer hedging flows near key knock-out barriers, positive seasonality into year-end and the recent dip in Nikkei implied volatility make the cases of buying calls more attractive”
“Whether it be investors adapting to the new operating environment or confidence in the economic recovery, option implied earnings moves for this week appear cheap and are running notably below their recent historical averages. This is in stark contrast to that witnessed leading to CQ2 results, particularly in the banks where option implied moves prior to earnings were double their historical averages”
Gross and Net leverage for both L/S hedge funds and the overall HF (all strategies) community are at or near the highest levels on GS record (since Jan ’15). US net positioning has generally shifted into Non-Consumer Cyclicals and Defensives at the expense of TMT since July
Renewables infrastructure stimulus is a strong narrative…and solar investments make up close to 20% of industrial silver demand, and 10% of total silver demand.
As GS notes;
“Biden has proposed a plan which involves installing 500 million solar panels in the US alone over the next 5 years (boosting global solar installations by 15%)…Chinese installation could reach 93 GW per year vs the current figure of 50 GW. This would represent a 40% boost to global installations.
Silver has other long logics to it as well.
Silver vs TAN…
Silver volatility as such is not cheap, but if silver starts catching up to solars (previous post) vols could offer relatively cheap upside plays.
Note how vols skyrocketed last time silver surged.
(SLV Nov 24/27 call spread gives aprox 4.5X the money, and the upper strike is right at recent highs, second chart).
On Sep 21 we outlined that NASDAQ was touching the lower part of the Bollinger bands and suggested;
” why not a frustrating bounce…”.
The bounce has been rather “frustrating” for most. If it ebbs out or not is to be seen, but chasing “confident” longs here looks a bit late…why not a small reversal lower just when everybody starts getting excited about the upside..
tax rate change should be negative for companies with low effective tax rates
min higher wage underperformers should be negatively affected..companies with high labor focus and low margins
fossil fuels/low ESG rating
anti guns, private prisons