It has been exactly six days in which algos, reversing the most recent drop in the S&P with buying sparked by a casual Nikkei leak that the BOJ may, wink wink, boost its QE (subsequently denied until such time as that rumor has to be used again), have pushed the market higher in the longest buying streak since September, ignoring virtually every adverse macroeconomic news, and certainly ignoring an earnings season that is set to be the worst since 2012. Today, the buying streak may finally end on rumors even the vacuum tubes are scratching their glassy heads if more buying on bad or no news makes any sense now that even the likes of David Einhorn is openly saying the second tech bubble has arrived. Keep an eye on the USDJPY which has had seen some rather acute "trapdoor" action in early trading and is approaching 102 after breaching its 55-DMA technical support of 102.38. If the support is broken here we go again on the downside. Keep an eye on biotechs and GILD in particular - if the early strength reverts into more selling again (after the two best days for the biotech space in 30 months), the most recent euphoria phase is now over.
US Equity markets were on a mission today... all-time highs for the S&P and Dow were in sight, green for April for the S&P, and unchanged year-to-date for the Nasdaq and Russell was just over the horizon, but... a total divergence from JPY carry, bond yields, credit, and even VIX meant that a 'warning' from David Einhorn about Tech Bubble 2.0 was just enough to take the juice out of what was already a low volume levitation. It's a Tuesday so we closed green - the 6th up day in a row - longest run in 7 months. Biotechs ripped higher on M&A "get rich quick'"fever - biggest 2-day rise in 30 months. Treasuries were mixed with 30Y bond yields ripping lower and 5s30s dropping 4bps to 1.75% - new lows since 2007. Copper made modest gains on the day but gold, silver, and worst of all WTI crude all dropped on the day (WTI -2% to $102).
"We have repeatedly noted that it is dangerous to short stocks that have disconnected from traditional valuation methods. After all, twice a silly price is not twice as silly; it’s still just silly. This understanding limited our enthusiasm for shorting the handful of momentum stocks that dominated the headlines last year. Now there is a clear consensus that we are witnessing our second tech bubble in 15 years. What is uncertain is how much further the bubble can expand, and what might pop it. In our view the current bubble is an echo of the previous tech bubble, but with fewer large capitalization stocks and much less public enthusiasm."
- David Einhorn
The stock market really was rigged... “It’s 2009,” Katsuyama says. “This had been happening to me for almost two years. There’s no way I’m the first guy to have figured this out. So what happened to everyone else?” The question seemed to answer itself: Anyone who understood the problem was making money off it...
- Ukraine leader denounces coup bid, West weighs sanctions (Reuters)
- Time to buy Imodium calls: Kuroda Easing Doomed as Yen Seen Missing 120 Level (BBG)
- Teens Disappear From U.S. Workforce (BBG)
- Fed Sets Rules for Foreign Banks (WSJ)
- Quant Funds Feel Investor Bite After Underperforming (BBG)
- China Probes Qualcomm, InterDigital Over Monopoly Concerns (WSJ)
- Capital One says it can show up at cardholders' homes, workplaces (LATimes)
- SEC Gains Power to Take Profit Made From Insider Trading (BBG)
While the stock market ramp on the disappointing ECB press conference can be, somewhat, explained and was to be expected by the central bank-addicted market's renewed focus that since the ECB did nothing, it is now the BOJ's turn to ramp up Quantitative Easing - a thesis which has been floating since November, and at one point resulted in 700 pips of "priced in" USDJPY upside - one group of investors is having a bad day: all those short Green Mountain Coffee shares, which as we pointed out last night exploded to 52 week highs in the aftermath of the Coke minority investment announcement. This is today's maximum pain trade.
These names can fall farther than investors ever think once the downside momentum kicks in......
With Ackman, Druckenmiller, Robertson, PTJ And Dimon On Deck, Here Are The Best "Robin Hood" Day 1 Hedge Fund IdeasSubmitted by Tyler Durden on 11/22/2013 07:57 -0500
Someone must have had an odd sense of humor to name a conference in which the most prominent US hedge funds appear, after Robin Hood - it seems in the New Normal the prince of thieves takes from the Middle Class and gives... to himself. Snyde remarks aside, yesterday was Day 1 of the Robin Hood investor conference, with such speakers as David Einhorn and Dan Loeb putting on their best book-talking face and pitching their currently marketable ideas (which they have put on long ago and are likely selling into strength). Below is a summary of the top recommendations from Bloomberg.
David Einhorn begins his discussion on the market warning that "certain aspects of the market are very much in bubble," with investors "dismissing valuation metrics." "The market is confused," between useful products and real profit streams, he suggests for a number of headline-grabbing higly speculative names. More broadly, Einhorn believes real damage has been done by Fed policy, and is "not convinced if or when they will ever taper." Crucially, he adds, we may see another rollover/recession and "the Fed will pour more fuel on the fire." The cognitive bias he exposes is that most people believe the Fed policy is supporting the economy (in some way), whereas (as we noted here) there are real costs and as Einhorn notes "Fed policy is a headwind to the economy," as he quantifies the hundreds of billions in lost interest income relative to wealth gains. Owning gold makes sense, he adds, "in case they lose control."
As we enter into the two final months of the year, it is also the beginning of the seasonally strong period for the stock market. It has already been a phenomenal year for asset prices as the Federal Reserve's ongoing liquidity programs have seemingly trumped every potential headwind imaginable from Washington scandals, potential invasions, government shutdowns and threats of default. This leaves us with four things to ponder this weekend revolving around a central question: "Does the Fed's Q.E. programs actually work as intended and what are the potential consequences?"
When even Bank of America has a note titled "It's getting frothy, man", and joins such other bubble-warners as JPM, Bill Gross, Larry Fink, and David Einhorn, one can be absolutely positive that the Fed will do... absolutely nothing.
- How much does QE contribute to the growing inequality of wealth in this country and what are the risks this creates?
- How much systemic risk does the Fed create by becoming what Warren Buffett termed “the greatest hedge fund in history”?
- How might the Fed’s expanded balance sheet and its failure to even begin to “normalize” monetary policy four years into the recovery limit its flexibility to deal with the next recession or crisis?
Confused how to trade the second coming of the dot com bubble and a world in which irrational exuberance has hit irrationally exuberant levels? You are not alone. Here is some insight from none other than David Einhorn originating in his latest letter to investors.
While commission-takers the world over attempt to dispel the fact that throwing your hard-earned money into the US equity market is absolutely not gambling, Bloomberg has decided that the time is right to relaunch "Poker Night On Wall Street." Hosted by Trish Regan, David Einhorn, Jim Chanos, and Mario Gabelli are among the top-ranked investors and hedge fund managers facing-off in a winner-takes all charity poker tournament at the Borgata in Atlantic City. By way of guidance, we include what investors and gamblers have in common...