Smart Money

"Assuming selling in accordance to the average allocation of FX Reserve Managers and SWF across asset classes, we estimate that the sales of bonds by oil producing countries will increase from -$45bn in 2015 to -$110bn in 2016 and that the sales of public equities will increase from -$10bn in 2015 to -$75bn in 2016."

“Fed Chair Janet Yellen will be forced to either acknowledge labor market tightening as reason to continue with the four-hike schedule for 2016 or risk her credibility, belittle job market stability and sound a warning about the risks of lower oil prices and cheap gasoline (sacrilege to regular Americans) by slowing the hiking pace after a single 0.25 percent increase last month. If she gets it wrong, things could get ugly fast."

The default of Sherwin Alumina, a US subsidiary of Glencore, refocused the market's attention on the one company which in September was among the hardest hit in the post-China devaluation rout, and the immediate result was that while Glencore stock plunged and is once again approaching all time lows, a more ominous development was that GLEN's CDS spiked to as much as 950 basis points, the highest since April 2009 and suggesting far more pain is in store for the commodity trading giant.

"As more companies cross the Rubicon out of the buyback zone, the bid for their equity shrivels.  For the 2013 financial year, 60% of stocks in my sample were in good shape to gear-up for buybacks. By the end of 2015, just 35% of the sample were in good shape to do buybacks."

One of the (many) fascinating things about this latest global financial crisis is that there’s no single catalyst. Unlike 2008 when the carnage could be traced back to US subprime housing, or 2000 when tech stocks crashed and pulled down everything else, this time around a whole bunch of seemingly-unrelated things are unraveling all at once.

Yesterday, in keeping with what has become a daily tradition, we asked a simple question: "Which hedge fund will close today." It turns out that despite our intention, the question was not rhetorical because just a few hours later Bloomberg answered, when it reported that the latest hedge fund casualty was another iconic, long-term investor: Scott Bommer's SAB Capital, which as of a year ago managed $1.1 billion, and which is now returning all outside money.

Perhaps mom and pop investors should show the following chart to their financial advisors, who directly or indirectly work for these institutions, and ask them: why should they be buying, when the counterparty they are buying from is, most likely, this very same financial advisor?

"Last week, during which the S&P 500 rallied 2.8%, BofAML clients were net sellers of US stocks for the second week, in the amount of $0.7bn. (Globally, our colleagues who track EPFR flow data have noted flows out of the US but into Europe and Japan in recent weeks). Net sales were chiefly due to institutional clients last week, who have sold stocks for eight consecutive weeks. Buybacks by corporate clients decelerated vs. the prior week, and YTD are tracking over $40bn, below last year’s record $45bn." So the smart money was selling, companies were not buying back, and stocks rallied nearly 3%.

There’s only one investment we can think of that many people either love or hate reflexively, almost without regard to market performance: gold. And, to a lesser degree, silver. It’s strange that these two metals provoke such powerful psychological reactions - especially among people who dislike them. Nobody has an instinctive hatred of iron, copper, aluminum, or cobalt. The reason, of course, is that the main use of gold has always been as money. And people have strong feelings about money. From an economic viewpoint, however, money is just a medium of exchange and a store of value. Efforts to turn it into a political football invariably are signs of a hidden agenda, or perhaps a psychological aberration. So, let’s take some recent statements, assertions, and opinions that have been promulgated in the media and analyze them.

For the first time ever, S&P 100 traders are holding more than 3 put options for every call.

While the fear and loathing of gold by the "smart money" and central banks has been extensively documented in recent years, another asset class is emerging as the "most hated" within the speculator community: treasurys, or rather, duration.

Can the third great bubble of this century survive a Fed that finally wants to get off the zero bound after its way too late, but can’t do it anyway without a massive crash inducing cash drain from Wall Street? And in the teeth of the next recession to boot? Yes, the end of the bubble does begin on December 16th.

According to Bank of America last week, during which the S&P 500 was essentially flat, BofAML clients were net sellers of $1.3bn of US stocks, following two weeks of net buying. Net sales were led by institutional clients, who have sold US stocks for the last five consecutive weeks.

As one hedge fund favorite long crashes (Chipotle is down 9% in the pre-market), so another hedge fund favorite short is about to spike (once it reopens for trading). JAB Group has decided that now is the time to offer a 78% premium to current prices to buy Keurig Green Mountain for $92 (note that is still down over 40% from its highs a year ago). The stock is currently halted at $51.51 leaving the 12% short interest biting their nails at the prospect of major losses and a good 'volkswagen-ing'.