The strong inflow of last week was not a one-off. That week followed by this week that together creates the largest 2-week inflow ever. The narrative is perfect: Cash on the sidelines feeling FOMO and the historic pattern post elections hold.
BoAM
This time is different. Contrary to the GFC, this time around hiring plans of small biz are back to all time highs. Companies reporting a hard time to find labor is also spiking. Nordea concludes;
"The general idea that disinflation would spread could thereby be totally wrong."
Nordea
Sentiment toward the Asian tech food chain remains quite positive, based on feedback from JPM Global TMT Conference this week. Key messages were:
(1) supply tightness in the Foundry/OSAT food chain shows no signs of easing, WFH demand (esp. PCs) remains strong, and inventory correction risk is not imminent
(2) the datacenter hardware and memory spaces are starting to show greenshoots, setting the stage for a strong 2021
(3) the EV component opportunity is likely to manifest in 2021 as the market broadens, especially in power, motors and auto-use ICs;
(4) Apple demand remains strong across the board, with the likelihood for above-seasonal demand into 1Q21 for iPhones. Demand for iPad and MacBook also appears to be trending better than expected. While the market has been concerned about Chinese competition, iPhone EMS vendors don’t appear to be too concerned about a near-term impact on pricing and allocation.
Refinitiv
ChiNext consolidating at elevated levels while Chinese margin trading debt continues higher.
Watch the above and Asian tech for overall clues.
Refinitiv
S&P 500 short interest continues to fall to new lows. Based on the chart at least 15 year low. Perhaps "lowest since shorts were discovered"
FactSet
157 of 189 large cap managers that track S&P500 that GS follows do NOT hold TSLA.
"Tesla’s scheduled December 21 inclusion in the S&P 500 could result in $8 billion of demand from active US large-cap mutual funds. Based on current market pricing, Tesla would account for around 1.5% of the S&P 500 index. Since many large-cap core funds are benchmarked to the S&P 500, managers will have to consider including the stock in their portfolios. Of the 189 large-cap core funds in our universe, 157 funds that manage around $500 billion in AUM did not hold TSLA on September 30. Assuming these 157 funds choose to hold TSLA at benchmark weight following its inclusion in the S&P 500, we estimate $8 billion of potential net buying of the stock (2% of TSLA market cap"
The brave warrior managers that decide not to buy will have nightmares about MS "bull case"
TME
Not that he would want to, but nevertheless, just worth revisting how TSLA market cap dwarfs everyting else in the auto sector, and this is after the 100% rally in EU Autos.
Market caps vs the Europeans.
TSLA 473bn
Volkswagen 80bn
Dailmer 60
BMW 47
Ferrari 35
Fiat 20
Porsche 17
PSA 17
Renault 9
Global:
Toyota 197bn
GM 61
Ford 35
Fed's latest BS updated vs bond volatility (MOVE index).
Maybe there is some more room down for bond vol, but the marginal utility is diminishing…
Refinitiv
The structural bid in equity volatility remains intact. Despite Fed having expanded the BS massively since the pandemic started, VIX still remains well above those levels, in contrast to bond vol that is much lower compared to pre pandemic levels.
The dynamics for equity vols are different and it must be frustrating for Fed to see this stubbornly elevated VIX (despite having had the biggest 7 day move lower ever post the elections).
VIX vs Fed BS.
Refinitiv
'Hedge fund gross and net leverage have risen a lot over the past 12 months. Net exposure is now the highest it has been for at least 5 years. Data from GS prime brokerage book as per 18th of Nov.
GS PB
Inboxes full of bearish outlooks for gold by "smart" sales guys at various investment banks. Vaccine is bad for gold and px action "sucks" are the arguments why they all see gold going lower.
As we wrote earlier today;
"A few months ago everybody was selling the long logic view to us, today we are only receiving bearish takes on gold.
A short term bounce would be the pain trade in gold here…"
Let's see how this plays out, but imagine gold ripped above the negative trend line that has been in place since Aug highs…
Gold volatility, GVZ, has come off substantially and offers rather cheap gold upside plays. Recall gold trades with a "positive skew" as it is a hedge itself.
Dec 178/185 cs costs you 0.9% to put on and gives some X4.4 max money pay off.
Net long positions across the complex (CL/ULSD/RBOB) are rising, up +68k contracts or about +14% in the last 2 weeks, looks impressive but when you look under the hood over +59k or 87% of that rise is just speculative short-covering offset by commercial selling, producers seem more than happy to let the specs own oil at multi-month range highs. Further while flat spec CL long positions look to be in "dry powder" range when the position is viewed against open interest it is far from a screaming buy. Money flows confirm other signals that this is a weak price advance that should be treated with caution especially with prices near range highs…
US 10 year vs Dr Copper gap becoming rather wide…or can they both be right?
Refinitiv
© 2020 The Market Ear
You are receiving this email because you signed up for the The Market Ear newsletter using your email content@mrtopstep.com.
If you'd like to unsubscribe and no longer receive this newsletter, please click here.
