Bank of America

According to Bank of America, the smart money is taking advantage of this latest rebound in stocks to sell to who else: the traditionally biggest sucker in the room - retail investors.

For the latest bit of evidence that global trade is indeed in free fall, look no further than the container terminals at the ports of Los Angeles, Long Beach, Calif. and around New York harbor which handle more than 50% of seaborne freight coming into the US. As it turns out, “peak” season turned out to be anything but.

Prepping has not only gone mainstream, it's infected even the billionaire culture as referenced recently on a ZH article:

• Bonds Rise as China Drags Down Metals, Selloff in Stocks Resumes (BBG)
• European Stock Rally Runs Out of Steam Amid China Growth Concern (BBG)
• Obama's immigration action blocked again; Supreme Court only option left (Reuters)
• Ukraine: Cyberwar’s Hottest Front (WSJ)
• With $170.4 Million Sale at Auction, Modigliani Work Joins Rarefied Nine-Figure Club (NYT)
• IEA Sees OPEC Market Share Growth in 2020 as Rivals Stagnate (BBG)

The cries for going totally crazy are growing louder... the lunatics are running the asylum. One shouldn’t underestimate what they are capable of. The only consolation is that the day will come when the monetary cranks will be discredited again (for the umpteenth time). Thereafter it will presumably take a few decades before these ideas will rear their head again (like an especially sturdy weed, the idea that inflationism can promote prosperity seems nigh ineradicable in the long term – it always rises from the ashes again). The bad news is that many of us will probably still be around when the bill for these idiocies will be presented.

• Bank of America 150K
• BNP Paribas 150K
• Morgan Stanley 165K
• Deutsche Bank 175K
• JPMorgan 175K
• HSBC 175K
• UBS 180K
• Goldman Sachs 190K

It is not just shorts buying and insiders selling. One other, quite persistent force has reemerged and contrary to the speculation that corporations are currently in an stock repurchase blackout period, the reality is anything but.

At the height of the financial crisis, the unprecedented decline in swap rates below Treasury yields was seen as an anomaly. The phenomenon is now widespread, as Bloomberg notes, what Fabozzi's bible of swap-pricing calls a "perversion" is now the rule all the way from 30Y to 2Y maturities. As one analyst notes, historical interpretations of this have been destroyed and if the flip to negative spreads persists, it would signal that its roots are in a combination of regulators’ efforts to head off another financial crisis, massive corporate issuance (which we are seeing), China selling pressure (and its impact on repo markets) and "broken" wholesale money-markets.

Call it an example of an abbreviated public lifecycle. After IPOing at $22.50 just last March and then promptly tumbling, Candy Crush maker King Digital was stuck in no man's land: demand for its products was promptly waning and the organic growth its underwriters had promised was nowhere to be found. The fundamentally savvy hedge funds sniffed this out and promptly jumped on board what seemed like a royal flush slam dunk to zero. And then, overnight, out of nowhere Activision decided to crush the Candy Crush shorts, who had built up a short stake amounting to 25% of the float, when it announced it would acquire the company for $5.9 billion or $18/share, a 16% premium to the previous day closing price... and also a 20% discount to the IPO price.

Having watched the credit markets grow more and more weary of the major US financials, it should not be total surprise that ratings agency S&P just put all the majors on watch for a rating downgrade:JPMORGAN, BANK OF AMERICA, WELLS FARGO, CITIGROUP, GOLDMAN SACHS, STATE STREET CORP, MORGAN STANLEY MAY BE CUT BY S&P. Despite all the talking heads proclamations on higher rates and net interest margins and 'strongest balance sheets' ever, S&P obviously sees something more worrisome looming. S&P blames The Fed's new resolution regime for its shift, implying "extraordinary support" no longer factored in. This comes just hours after Moody's put Bank of Nova Scotia on review also (blaming the move on concerns over increased risk appetite).

• China PMI>50.5
• US ISM>52
• US payroll>225K
• US banks rally: XLF>$26 would confirm stronger “domestic demand” expectations.
• US dollar stable: if the Fed can hike without boosting dollar this is positive

The bullish fund flows are back. This is how Bank of America summarizes the latest EPFR capital flow sentiment: "Loving Wall Street: $15bn equity inflows + $5bn HY/IG inflows + 6 straight weeks of commodity inflows = investors are "risk-on."

"The rise in household savings rates amid so much central bank support is paradoxical to us, and mimics what we highlighted in the credit market earlier this year. Companies in Europe are deleveraging, not releveraging"

While we still haven't taken out the all time highs said squeeze would lead to - there are about 30 points to go there; but as the following chart below shows, with just two trading days left, October is on pace for the biggest monthly point jump in S&P500 hi