• Category Archives Market Commentary

  • Paulson Shutters Long-Short Equity Fund Amid Massive Healthcare Losses

    Posted on by Jon Comment

    After gaining instant fame with his massive subprime bet back in 2008/2009, John Paulson can’t seem to buy a clue of late. Over the past couple of years, a series of strategic missteps have resulted in abysmal returns and increasing concern among investors that Paulson may have been nothing more than a “one-trick pony” all along.
    Of course, as we pointed out back in November, one of the biggest of those ‘missteps’ seems to have been the creation of a $500 million, long-short equity fund focused on healthcare about two years ago.
    The strategy seemed simple enough at the time: make a massive, Paulson-esque bet on the consolidation of large multi-national pharmaceutical businesses, hedge that bet with bearish wagers on the broader markets and sit back and wait for the money to flow in just like with the subprime bet. Unfortunately, exactly the opposite happened in 2016 with the broader markets advancing while Paulson’s largest pharma holdings completely collapsed anywhere from 30% – 85%. Oops.

    This post was published at Zero Hedge on Jul 27, 2017.

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  • How I Know Facebook Is LYING

    Posted on by Jon Comment

    Not difficult to figure out folks, but I think you should buy the stock because lying firms are great investments.

    In other words Zuckerpig (and Sandberg) claim that 83% of all persons over the age of 15 between the US and Canada (Canada has about 30 million adults) are active monthly on Facebook.

    This post was published at Market-Ticker on 2017-07-26.

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  • These Blue Apron Stock Price Predictions Are Absolutely Wrong

    Posted on by Jon Comment

    Blue Apron Holdings Inc. (NYSE: APRN) stock has been trading for about a month, and a slew of bullish Wall Street ratings and Blue Apron stock price predictions were just released. However, Money Morning experts believe those predictions are dangerously wrong…
    The meal-kit delivery service stumbled as a public company right out of the gate with a stock issue price some 40% below estimates. That was thanks in part to the giant Amazon.com Inc. (Nasdaq: AMZN) announcement that it will buy Whole Foods Market Inc. (Nasdaq: WFM) released nine days earlier. And when Blue Apron stockstarted to trade, it almost immediately began to slide lower.
    From its June 29 debut at $10 per share, its price tumbled 35%.
    Analysts, however, see investors changing their views on the company even with competition from Amazon. According to data from MarketWatch, Blue Apron now enjoys seven ‘Buy’ ratings and four ‘Equal Weight’ ratings. Only one analyst in the group maintains a ‘Sell’ rating.

    This post was published at Wall Street Examiner on July 26, 2017.

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  • What If The Debt Ceiling Turns Ugly: How To Trade A Fall Spike In Volatility

    Posted on by Jon Comment

    As we first showed last week, while the equity market has remained completely oblivious to what the upcoming debt ceiling fight, which Morgan Stanley admitted over the weekend “worries us most” of all upcoming catalysts, the same can not be said of the T-Bill market, where 3M-6M yields have inverted the most on record on concerns about a potential selloff (or worse) in 3M bills which mature just after the time the US Tsy is expected to run out of cash, should the debt ceiling debate fail to result in a satisfactory outcome.

    And while it is a gamble to suggest that stocks will ever again respond to any negative news or still have any capacity to discount any future event or outcome, Bank of America dares to go there, and advises clients that between seasonality, and the already record low VIX, the debt ceiling is a sufficiently risky event to expect that equity volatility will finally wake up, and that “seasonality + catalysts suggest record low vol likely unsustainable through the fall.” Here’s the big picture from Nitin Saksena and team:
    While VIX has been making headlines for the most consecutive closes in history below 10 (now 8 days), medium-term VIX futures have quietly fallen to ~10-year lows, breaking the previous record from summer 2014. However, we think volatility is unlikely to sustain these extreme lows in the fall and like selling Oct VIX puts as (i) seasonal patterns suggest the VIX troughs in Jul and peaks in Sep/Oct, (ii) the VIX has ‘settled’ below 12 in only two of the past 27 Octobers, and (iii) fundamentally, the threat of debt ceiling brinkmanship in Sep/Oct, which has already spooked the T-bill market, should help support equity volatility. For example, we like selling the VIX Oct 12 put vs. the 14/19 call spread for zero-cost upfront (Oct futures ref 13.35).

    This post was published at Zero Hedge on Jul 25, 2017.

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  • “If The VIX Goes Bananas”, Morgan Stanley Shows What It Would Look Like

    Posted on by Jon Comment

    It’s easy to become numb to the low volatility environment and the risks it presents. While trying to pick a trough in vol has been a fool’s errand, focusing on the risks resulting from vol being so low is not. Low volatility has produced a regime where the risks are asymmetric and negatively convex, so being prepared for an unwind is critical. This is not a call that vol is about to spike, but you need a plan if it does.
    This note details how a short vol unwind might develop. A violent rise in volatility could be driven by just a 3% to 4% one-day S&P 500 selloff. Right now the risk is greatest in the VIX complex, and demand for VIX futures from three main sources could result in 100,000 contracts ($100mm vega) to buy in a down 3.5% SPX move. For context VIX futures ADV over the last year is 230,000 (although has risen to as high as 700,000 in big selloffs).

    This post was published at Zero Hedge on Jul 25, 2017.

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  • Barclays Exit Of Energy Business Triggers Surge In Oil Options Trades

    Posted on by Jon Comment

    Several hours before the US stock market opened on Monday, the commodity world was shaken by an unexpected surge in crude options trades, with traders noting that “someone is either moving positions, blown up or getting out of commodities. MASSIVE amount of blocks going through in crude options.”
    Someone is either moving positions, blown up or getting out of commodities. MASSIVE amount of blocks going through in #crude #options.#OOTT
    — Mark Scullion (@mscullion) July 24, 2017

    A Bloomberg alert shortly after confirmed the huge size of trades crossing the tape, when nearly $100 million in oil options traded simultaneously:
    WTI crude oil options traded the equivalent of 48m bbl of contracts via block, according to data compiled by Bloomberg. Total value of all options combined is ~$99m Options include contracts from September 2017 through December 2020 5 largest blocks were: 4.4k Dec. $90 calls, 2.8k Dec. $60 calls, 2.5k Dec. $125 calls, 1.7k Dec. $95 calls, 1.4k Dec. $46 calls

    This post was published at Zero Hedge on Jul 24, 2017.

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  • These Are The 10 Most Crowded Long And Short Trades According To UBS

    Posted on by Jon Comment

    In this market where fundamentals long ago ceased to matter, and where positioning remains one of the few remaining sources of alpha, investors have been focusing on lists showing the most over and under-owned stocks. However, contrary to the narrative that the most heavily owned stocks outperform the most shorted, or underowned ones, and vice versa, recently BofA calculated that for the third year in a row, “the Top 10 most overbought stocks have trailed the S&P for each of the past three years, while the Top 10 “most neglected” stocks outperformed the S&P on average by 11.6%.”
    This is what BofA’s quant team found:
    As flows from active to passive funds have accelerated, one strategy that has worked unusually well for the last several years is a simple positioning trade of selling the 10 most overweight stocks and buying the 10 most underweight stocks by active managers. This single trade has yielded over 16ppt of alpha year-to-date. And implied derisking/ outflows on Brexit alone have been fierce, with the same strategy generating 5.2ppt of alpha just since last Thursday’s close. Even if Brexit’s impact on funds is limited from here, we believe that crowded stocks will likely continue to underperform neglected stocks: a whopping two-thirds of US large cap AUM still resides in active funds – there is likely a lot more to go in the rotation from active to passive.
    Visually:

    This post was published at Zero Hedge on Jul 24, 2017.

    This entry was posted in Market Commentary

  • Existing Home Sales Slump In June – Weakest Summer Selling Season Since 2011

    Posted on by Jon Comment

    On the heels of homebuilder optimism tumbling to 8-month lows in July, existing home sales slumped in June (down 1.8%, more than the 0.9% decline expected) to the second lowest SAAR this year. Existing home sales are now unchanged since September, but we note that average prices are up 6.5% YoY.
    Total existing-home sales , decreased 1.8 percent to a seasonally adjusted annual rate of 5.52 million in June from 5.62 million in May. Despite last month’s decline, June’s sales pace is 0.7 percent above a year ago, but is the second lowest of 2017 (February, 5.47 million).
    Since rates surged, exisitng home sales have gone nowhere (but prices have risen)…

    This post was published at Zero Hedge on Jul 24, 2017.

    This entry was posted in Market Commentary

  • Commercial Property Market In Dublin Is Inflated and May Burst Again

    Posted on by Jon Comment

    Commercial Property Market Is Inflated and May Burst Again
    by David McWilliams
    Dublin property investors had better hope that Brexit happens soon.
    They should also hope that it’s not just a ‘hard’ Brexit, but a granite Brexit – a Brexit that’s as hard as possible. They should be betting on the buffoonery of Boris Johnson, down on both knees praying for a massive barney between Davis and Barnier.

    This post was published at Gold Core on July 24, 2017.

    This entry was posted in Market Commentary

  • Russell Clark Speaks In RealVision’s “Most Requested Interview Ever”

    Posted on by Jon Comment

    According to RealVision, he’s one of the greatest investors you’ve never heard of. According to us, he ran what was (formerly) the world’s most bearish hedge fund, although at the end of 2016, after suffering substantial losses, he capitulated and went flat, after closing much of his short book.
    ***
    To be sure, Russell Clark, and his Horseman Global (which after phenomenal returns for much in the post-crisis period, closed 2016 with a thud, dropping 24% and down another 8% YTD, isn’t a household name. But in investment circles, he’s known as one of the world’s most aggresive, and better, short sellers.
    In a rare camera appearance, Russell Clark sat down with Real Vision TV’s Raoul Pal in what has been dubbed as “one of RealVision’s most requested interviews ever”, to discuss investing and share his approach to markets.
    In one part of the interview, Clark says that one reason for his success is his focus on currencies. While for many investors the risk and reward of currencies is an afterthought, it forms the base of Clark’s investment worldview. ‘What we try and do is invert the process,’ Clark says. ‘So, we’d put currencies at the beginning of the investment process rather than at the end. And that’s really been the heart of how I look at things…’

    This post was published at Zero Hedge on Jul 23, 2017.

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  • Why VIX ‘Acceleration Events’ And Extreme Short Interest Signal “Clear Path To Uglier Scenarios”

    Posted on by Jon Comment

    VIX ETFs and ETNs
    We take a deeper dive into the strange world of VIX ETFs and ETNs. We take a quick look at the incredible short interest in both the long VIX products and the short VIX products. This massive short interest in both long and short products seems unique to the VIX world (it reflects a re-balancing trading strategy that works in the VIX space because of the high volatility of the VIX products) (VIX ETFs seem to run 5 to 10 times the realized volatility of the S&P 500).
    Then we dig into the prospectus for each of the 4 funds I focus on (VXX, UVXY, XIV and SVXY).
    What is important is the Acceleration Event in XIV. The language from the prospectus seems clear that if the VIX Short Term Futures Total Return index moves 80% in a day, then XIV has to unwind. While an 80% move in a single day is very unlikely, I believe that the lower VIX goes, the easier it is for it to occur (VIX at 8 only needs to jump to 14.4 in a day for this to occur), because these VIX products make a ‘mistake’ in my view of converting changes in VIX to percentage changes to provide returns (the VIX futures do not do that for example).
    The problem with an XIV acceleration event is two-fold – all of the hedges (short futures positions it has) will need be covered, just as the market is struggling. The second order problem is that many investors who have been waiting for a spike in VIX to sell volatility won’t have an outlet. If you planned to buy XIV on a VIX spike and it isn’t there, what do you buy? It is far less clear what sort of trigger mechanism SVXY has (that is something we are looking into).

    This post was published at Zero Hedge on Jul 23, 2017.

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  • Market “Paralysis” Confirmed – Squeezed Shorts And Anxious Longs Are Fleeing Stocks

    Posted on by Jon Comment

    For the last two years, short interest in the US stock market’s largest ETF has collapsed as bears have been squeezed back to their lowest level of negativity since Q2 2007 (the prior peak in the S&P). But, there’s a bigger issue – despite record highs and ‘no brainer’ dip-buying, anxious longs have dumped S&P ETF holdings for four straight months – the longest streak since 2009 – seemingly confirming Canaccord‘s recent finding that “it’s not complacency, it’s paralysis.”
    Bearish investors say they are scaling back on these bets not because their view of the market has fundamentally changed, but because it is difficult to stick to a money-losing strategy when it seems stocks can only go up.
    ‘There seems to be an overall view that people are invincible, that things will always go up, that there are no risks and no matter what goes on, no matter what foolishness is in play, people don’t care,’ said Marc Cohodes, whose hedge fund focused on shorting stocks closed in 2008.

    This post was published at Zero Hedge on Jul 22, 2017.

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  • XIV Hits All Time Highs As The VIX Sets Records That May Never Be Broken

    Posted on by Jon Comment

    In last week’s article, I had noted that as long as the XIV was able to hold the 83.93 level, I expected to see it hit the 87.76 – 91.53 zone into this week with the potential to see a move into the mid 90’s prior to making a large degree top.
    On Tuesday of this week, the XIV closed at the upper end of this 91.53 zone and then on continued to extend higher into Wednesday, and as of Thursday’s close is now trading at the 93.83 level having so far been contained by the 238.2 Fibonacci extension level of the move up off of the 7/6 low.
    While the XIV is so far following through on the smaller degree pattern and is tracing out a very clean impulsive pattern off of the 7/6 low, it is now starting to push the limits of the upper end of what I still prefer to count as a large Ending Diagonal pattern off of the April 12th low.
    The price action over the next several trading sessions should be key in helping give further clues as to where the XIV is heading in the near term.
    As I noted in the title of this article, the CBOE Volatility Index or the VIX index has set some records in 2017 that have been truly remarkable and may never be seen again. Not only in ultra-low price levels but in the frequency that these ultra-low price levels have occurred.

    This post was published at GoldSeek on Friday, 21 July 2017.

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  • Weekend Reading: Charge Of The Light Brigade

    Posted on by Jon Comment

    As you I discussed last week, we added risk exposure to portfolios with the breakout to new highs that came in conjunction with a short-term ‘buy signal’ as shown below.
    However, when we zoom out a bit, a different picture emerges. Note that in all 3-cases, there was a ‘Stage-1 Advance’ followed by a correction which led to a ‘Stage-2 Advance.’ The correction that followed then provided for the final bullish advance which I call the ‘Charge Of The Light Brigade.’

    This post was published at Zero Hedge on Jul 21, 2017.

    This entry was posted in Market Commentary

  • No More “Cash On The Sidelines”: Private Client Cash Levels Drop To Record Low

    Posted on by Jon Comment

    One can finally put all references to “cash on the sidelines” in the trash can, not only for purely logistical reasons (when someone buys a stock, the seller ends up with the cash), but also from a purely cash allocation basis. According to the latest BofA flow show report, Michael Hartnett writes that as of the latest week, private client cash – i.e., high net worth individuals, or those who still allocate capital to single-stocks and ETFs on a discretionary basis (unlike the broader US public which has long ago given up on the stock market), is now at a record low, taking out the cash levels observed in the period just prior to the last market peak in 2007: “GWIM cash allocation % AUM falls to all-time low of 10.4%.”

    This post was published at Zero Hedge on Jul 21, 2017.

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