As asset bubbles are in the way of the Fed’s policy, a decline in stock prices removes the equity market bubble and enables the Fed to print more money and start the process up again. On the other hand, the stock market decline could indicate that the players in the market have comprehended that the stock market is an artificially inflated bubble that has no real basis. Once the psychology is destroyed, flight sets in.
Paging Carl Icahn... AAPL shares just broke below $100 in the pre-open, the lowest since late October.
"YTD investor performance has been plagued by “non-stop pain trades” as liquidity expectations weaken and investment horizons shorten. For example, July/August saw the S&P 500 media sector lose $100bn of market cap in 15 trading days, as well as significant losses in Asian and Emerging Market currencies following the Chinese yuan devaluation."
You can stop waiting for a global financial crisis to happen. The truth is that one is happening right now. All over the world, stock markets are already crashing...
As it turns out it is not just in the US that the "smart money" is bailing out as fast as it can: according to Bloomberg, the wealthiest investors in China’s stock market are also scrambling for the exits. To wit: "The number of traders with more than 10 million yuan ($1.6 million) of shares in their accounts shrank by 28 percent in July, even as those with less than 100,000 yuan rose by 8 percent, according to the nation’s clearing agency. While some of the drop is explained by falling market values, CLSA Ltd. says China’s rich have taken advantage of state buying to cash out after the nation’s record-long bull market peaked in June."
With hedge funds net short for the first time ever, and Commercial Hedgers are holding the lowest net short position in gold futures since the launch of the gold bull market in 2001, we thought it interesting that - for the first time since 2009, BofAML's fund managers' survey finds Gold is "undervalued."
“Maybe this isn’t a great indication of the state of the economy.”
Late in June, BofAML noted that during the previous week "sales [of US stocks] were the largest since January 2008, led by institutional clients [whose] net sales were the largest in data history." Whether that particular bout of smart money dumping was simply an effort to get out ahead of what threatened to be a rather ugly conclusion to six months of bailout negotiations between Greece and creditors we can't say, but what we do know is that not only is the smart money (still) selling, but now even the dumb money has joined the party.
For the last three weeks, gold has experienced something that has never happened before - hedge funds aggregate net position has been short for the first time in history. However, as Dana Lyons notes, this week saw another 'historic' shift in gold positioning as commercial hedgers shifted to the least hedged since 2001... so the 'fast' money is chasing momentum and the 'smart' money is lifting hedges into them.
Disney is down over 8% from post-earnings highs for its biggest drop sicne at least Oct 2014 and back at 2-month lows... The Happiest Place On Earth... isn't...
Can markets be saved an eighth time, a ninth time, a tenth time this year? How about next year?
Investors are dumping billions of dollars worth of gold, commodities and emerging market assets in a wave of "capitulation" selling, Bank of America Merrill Lynch said today as reported by Reuters.
"They are going to be toast. It will be one of our first levels of shorting the moment we start to see cracks, because it’s ripe with retail, emotional investors."
Moments ago we got the latest BofA client flow update in which we were expecting to find that the "smart money", flush with cash, and taking advantage of the Greek "deal" would jump in on last week's biggest weekly market surge since October 2014 when Bullard hinted at QE4 and unleashed a buying surge. To our surprise we find that not only did "smart" money continue selling, but they were joined by the "smartest" money of all, hedge funds. And who did they sell to? Why retail investors of course... and corporate buybacks but that should go without saying.
The latest BofA Fund Managers Survey has left the report authors stumped: on one hand fund managers have the highest cash levels since Lehman at 5.5% (most since December 2008 and prior to that November 2001), which combined with a capitulation in risk appetite due to ongoing stress in Greece and China would suggest a screaming buy signal... but there is one problem: the same fund managers refuse to actually capitulate and sell, and as a result not only are bank longs at record highs, but equities remains solidly overowned but the group, offset by "protection" levels which are the highest since February 2008. In short, the current positioning is a "complete contrast to 2008."