Smart Money

Not "Buying" The Santa Rally: In Week When S&P Rose 2.8%, The Smart Money Sold (Again)

"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%.

Why 'The Regime' Hates Gold

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.

December 16, 2015 - When The End Of The Bubble Begins

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.

Hedge Funds Sitting On $1 Billion Loss As "Most Hated Name" Keurig Acquired At 78% Premium For $92

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'.

When Wall Street Gets DeFANGed - Look Out Below!

At this week’s close, the FANG stocks were valued at just under $1.2 trillion, meaning they have gained $450 billion of market cap or 60% during the last 11 months - even as their combined earnings for the September LTM period were up by only 13%. In a word, the gamblers are piling on to the last train out of the station. And that means look out below!

Permabulls Whistling Past The Grave

The Fed was out in force yesterday peddling some pretty heavy-duty malarkey about the up-coming rate liftoff at the December meeting..."If we begin to raise interest rates, that’s a good thing." That’s not a bad thing." Goldman is putting out the final mullet call for this Bubble Cycle because it knows that this bull is dying; that insiders still have massive amounts of stock winnings to unload; and that the clock is fast running out. The expiring clock is evident in the S&P 500’s one-year round trip to nowhere. Despite the fact that the Fed has ponied-up a stick save at every single meeting this year, the market’s 27 separate efforts to rally have all failed for the simple reason that the jig is up.

Goldman 'Explains' This Is Not A "Low Quality" Rally, It Is "Macro-Free" - So Don't Worry

It appears even Goldman Sachs was surprised by the recent rally in US equities - especially in light of the explicit hawkishness of The Fed yesterday. In a trading note this morning, the bank says that market risks are real and rising (but are not overwhelming) as it explains, we assume with no intent at humor or sarcasm, that they "prefer to think of the recent equity rally as 'macro-free' rather than 'low quality'," reiterating their view of the cycle and of markets as "fundamentally upbeat." They do, however, admit over the last month, the likelihood of a drawdown in the US equity market further increased, and remains at mildly elevated levels.

The 'Smart' Money Has Never Been This Long The Long-Bond

Back at the beginning of 2014 - when commercial traders were net long nearly 40,000 options and futures contracts on the US long bond - it marked the peak in yields and preceded a 13 month rally in bonds that took 30-year treasury rates from 4% to 2.25%. Now, as Gavekal Capital's Bryce Coward notes, the commercial traders, aka "smart money," were net long about 61,000 contracts, or 50% more contracts than the peak in 2014. If recent history is any guide then a 1 handle on the 30-year treasury bond could be a reality!