Wall of Worry

The Blow-Off Top Is Here: Second Largest Weekly Inflows To Wall Street In History

For confirmation that the market is now in its "blow off top" phase, look no further than the latest BofA "flow show" in which Michael Hartnett reports that capital markets just saw their biggest week of equity inflows since the US election ($24.6bn), another chunky inflow to bonds ($9.0bn), which combines to "the second largest week of inflows to Wall Street ever (largest was $35.5bn in Dec'2014)."

As Stocks Sink, This Is What RBC Is Looking For

"...reticence from the buyside to take-down ‘net length’ is beginning to sting as recent ‘hiding-places’ are now dragging and generally very ‘high beta’ long portfolios (crowded ‘market’ factor) means increasingly painful drawdowns."

Weekend Reading: Markets May Be Getting Expensive

"This leaves markets with the “hope” trade in peril as Congress continues to trip itself up in moving its legislative agenda forward while, at the same time, the Fed has accelerated the pace of monetary tightening and sending clear warnings to the markets...This has “bad” written all over it."

Investors' Leverage Hits An All-Time High

"...on a quarterly basis, the market is currently more overbought than at just about any other point in history... Combined with record levels of margin debt, the current conditions HAVE NEVER lasted indefinitely. "

Credit Suisse "Climbs The Wall Of Worry", Raises S&P Target To 2,500 From 2,350

"Following the reaching of our mid-year S&P 500 target, we raise both our mid-year and year-end S&P targets to 2,400 and 2,500, respectively (from 2,350 and 2,300). We continue to see a clear-cut risk that we get an overshoot to the upside in equities that then reverses later on; more realistically, this reversal is likely to be a very late-2017 or 2018 event." - Credit Suisse

Risk-Ignorance Reaches 23 Year High As Short Interest Hits Record Low

Investors are willing to pay more for a given level of risk than at any time since 1994 and short interest has collapsed to record lows... "if The Fed follows through on its convictions, look for a flat yield curve and a recession to wipe out 50% of equity prices for the third time in the past seventeen years."

Weekend Reading: Trump-eting Dow 20,000

We can only surmise how this eventually turns out. But whether it is extremely suppressed volatility, extreme long positions in small-cap stocks or historical short positions in bonds, the “rubber band” is stretched very tightly. Of course, while “Trump-xuberance” currently reigns, there seems to be nothing to worry about. But then again, maybe that is exactly what we should be worrying about.

Dave Collum's 2016 Year In Review - "And Then Things Got Really Weird..."

"Markets don’t have a purpose any more - they just reflect whatever central planners want them to. Why wouldn’t it lead to the biggest collapse? My strategy doesn’t require that I’m right about the likelihood of that scenario. Logic dictates to me that it’s inevitable..."

The Most Hated Asset On The Planet

"I know any suggestion of gold rising and stocks declining seems absurd. After all, gold is probably the most hated asset class on the planet with stocks being the most loved. Yet somehow that doesn’t bring me much comfort as I am pretty sure last year the bulls were extremely confident the Fed hike wouldn’t derail the budding recovery. The fact they are even more confident today doesn’t bring me any solace..."

"Too Slow, Too Reluctant" - JPM Finds Most Investors Missed The "Trump Trade"

The majority of JPMorgan's institutional clients have been either too slow or too reluctant to jump into the Trump trade post November 8th. Their reluctance stems from a general belief that markets are getting ahead of themselves and from a general dismissal of the idea that Trump represents a game changer for markets.

"What If Market Consensus Is Wrong" - A Hedge Fund Ponders The Alternative

"What if consensus is wrong: what if rates are rising due to the end of Quantitative Easing and not because of reflation/escape velocity on growth? Rates then rise without growth, perhaps even without much inflation. Indeed, rates started rising back in August, on momentous shifts in policy by BoJ (forced by capacity constraints and collateral damage). Such scenario is not good for equities, contrary to what currently believed by markets."