Latest AAII bullish readings sentiment needs little commenting.
It would be too perfect if this reversed lower from here…
Refinitiv
Do you feel there is nothing to worry about, and that hedges are wasted money?
Earlier conversation with a big PM today;
"Man, all these hedges I pout on over past weeks have just cost me money…"
AAII bearish sentiment reading.
Refinitiv
No social distancing among the bulls; they seem to love crowds…
As posted earlier – latest AAII bullish readings sentiment needs little commenting. Now you might expect that hedge funds either had been selling just a tad to these late-comers – or maybe that the Monday MoMo Mayhem would have caused them to de-risk a little. Think again. They are still very much all-in.
Gross Exposure Level at 100%-tile since Jan-2018. Net Exposure Level at 100%-tile since Jan-2018 (data as of yesterday close from JPM PB).
Or the "not in touch with the rest of the world" version – will I be able to visit my sky chalet in Courchevel in December?
There is little doubt that the new partial lockdowns will beat the virus, but the question is whether a month's restrictions through November is enough. In other words, have authorities reacted quickly enough to restore things to a semblance of normal by Christmas?
Pantheon
US hospitalization rate growth gives strong reasons for concern. And now the indoor season starts
JHU
We have previously covered the fast increase of European Zombie companies. By the looks of it, things are not that much better in the US. A record number of companies (18% of Russell 3000) are zombie companies in the US as well.
Maybe Ackman is on to something with hedging against corporate defaults?
Stansberry Research
People have been trying to push the momentum break out for months now, but it has failed to materialize. TME's take over past months has been "this market needs to sober up and consolidate", mainly due to the fact there are no narratives strong enough for the break out everybody is expecting, at least not yet.
The double tops have become double bottoms and just at the wrong times have people gotten excited about THE break out.
Let's see what happens next, but we are still not excited…
Refinitiv
Probably most definitely the most important question for this generational bull-market. When the "tools & ammo" run out bulls should save the last bullet for themselves…
CITI writes a CB wish-list for 2021:
"Despite positive vaccine news, additional policy support remains necessary. But many monetary policy tools such as strengthening forward guidance; buying additional or longer-dated bonds; and introducing yield curve control require fiscal actions for an effective economic boost. Policy rate cuts may be attempted, if fiscal policymakers remain on the sideline, but would take rates into negative territory in many economies. The economic impact is likely limited, as banks may not transmit negative rates to consumers and businesses. If they do not, the cost for the banks leads to a rising reversal rate, and further cuts would leave an economic drag. The unlikely scenario of the Fed introducing negative rates would have important implications for the rest of the world"
US 10 year has, contrary to "feelings", traded inside a range, basically bouncing between 0.65% and 0.9%, with one "serious" attempt to break out higher during the June move.
Back then it moves sharply higher over three days, and then reversed the entire move in a few sessions.
Maybe this time is different given the vaccines news, but imagine a short term "sudden" reversal lower in yields from here…
Refinitiv
CESIUSD index continues crashing and is now back to mid June levels. The move lower from highs in mid July is rather "spectacular".
The gap vs Spuz is getting rather wide here. Imagine if you are running longs here (aggregate net longs very long here), mostly due to FOMO factors, and markets suddenly reverse lower and you have to explain your longs to the CIO who is pointing out the crashing CESI index to you….
Refinitiv
DM fiscal stimulus was around 8-10%, while EM was around 3-5% of GDP in response to Covid. Hard to see that repeated in 2021.
Various government sources
VIX term structure shifting higher, with somewhat a rather big "panic" move in the short end of the curve, and we are only down a little more than 1%…
vixcentral
Credit where credit is due. MSTR's Bitcoin long is performing well, and that last "batch" was very well timed. CEO Michael Saylor tweeted in mid Sep:
"On September 14, 2020, Microstrategy completed its acquisition of 16,796 additional bitcoins at an aggregate purchase price of $175 million. To date, we have purchased a total of 38,250 bitcoins at an aggregate purchase price of $425 million, inclusive of fees and expenses."
Total value of the BTC leg is now around $618 mill. MSTR market cap stand at $1.7bn, so it is not a "straight" arb, but watch the recent divergence between MSTR and BTC closely.
Refinitiv
Bitcoin is for the younger cohort, while gold remains the "old investor's" game. These two assets are not perfect substitutes, but have several things in common.
We have recently learnt that some of those old guys that previously invested in gold ETFs such as family offices now are looking at bitcoin as an alternative to gold.
The question we are asking ourselves here is if gold will catch up to bitcoin, just as it eventually did in Q" 2019?
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