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    In seven years Chinese GDP "flips" above US GDP

    This long term trend you can't fight...TME has lately been writing a lot about the increasing Chinese tech momentum and how it is surging as part of the EM space.

    When it comes to inflation this is actually a massive deflation narrative in the making. Chinese tech disruption is a "deflation bullish" narrative just as DM saw in late 90s. The Yuan has gained a lot lately (and China seems relaxed about it). As Bofa writes, China's old plan (weak FX, excess credit etc) is set to become US/Europe's new plan.

    Wheel of fortune...

    In seven years Chinese GDP "flips" above US GDP
    Source: BofA

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    The haves and have nots of 2020
    The haves and have nots of 2020
    Source: JPM
    Global Credit Spreads and the Negative-Yielding Government Debt Stock
    Global Credit Spreads and the Negative-Yielding Government Debt Stock
    Source: JPM
    Be a hedge fund VIP stock

    the crowded hedge fund holdings have been doing well.

    The hedge fund millionaires who are not yet, will soon become billionaires...

    Be a hedge fund VIP stock
    Source: Goldman
    Fed ain't buying (much)

    Empty in "that" order book...

    The most important is to watch the LQD 134 level (pre corona highs, chart 2).

    Fed ain't buying (much)
    Source: GS
    Fed ain't buying (much)
    Source: Refinitiv
    The equity portion of deals is trending higher post-COVID
    The equity portion of deals is trending higher post-COVID
    Source: JPM
    Merger Mania: where are you?

    1/3 of Q4 already passed. Time to go manic...

    Merger Mania: where are you?
    Source: Dealogic
    Big "not" top?

    Fed is not tightening, most stocks not in bull market (catch up?), 65% of MSCI stocks are still in bear market (20% below their ATHs), MSCI equal weighted has done very little since 2007 top

    Big "not" top?
    Source: BofA
    Big top?

    IPO mania (see previous post), M&A premium 142% vs long term average 23%, $3.2 tn raised for IG/HY, SPACs etc, US houses soaring, concentrated equity rally, greedy IG and tech inflow, chart double top, negative narratives becoming bullish narratives (blue wave is now bullish...)

    stats via BofA
    Ant - talk of great timing for size

    IPO ETF up more than 150% from March lows.

    Ant - talk of great timing for size
    Source: Refinitiv
    Flows to know

    HY bond outflows accelerate

    tech inflows remains robust

    inflows to Japan strongest since Apr 2019

    EM largest inflow in 7 weeks

    largest outflow from European equities in 5 mths

    BofA
    US vs German 10 year yield gap widening

    Go figure...

    US vs German 10 year yield gap widening
    Source: Refinitiv
    Yuan's perfect trend channel continues

    Almost like Madoff drew it...

    Yuan's perfect trend channel continues
    Source: Refinitiv
    ECB has dry powder...

    ...and given the renewed corona situation, there will most likely be even more dry powder.

    Nordea sums it up well;

    "By pre-promising a recalibration of the instruments in December, the ECB effectively added a put to risk assets. A bigger sell-off means a bigger package in December. It is as simple as that".

    Given the ECB put, TME's take on equity volatility here remains intact, vol trades rather rich here and should be used to "enhance yield" (second chart).

    ECB has dry powder...
    Source: Nordea
    V2X
    ECB has dry powder...
    Source: Refinitiv
    Some European ICUs already "pushing it"
    Some European ICUs already "pushing it"
    Source: Nordea
    THE five year plan - China moves to technology self-sufficiency

    “We are willing to work with the world on climate change, energy change, public health, and support global experts on their studies, complete China’s legal environment, better protect intellectual property and try to create a friendly environment for technology innovation in China,” Wang Zhigang, Minister of Science and Technology

    Full SCMP articlehere.

    Will consumer spending also do a W?
    Will consumer spending also do a W?
    Source: JPM Chase
    Short gamma territory...

    ...but note the diminishing slope of the QQQ gamma curve.

    Short gamma territory...
    Source: Spotgamma
    Earnings temperature check - don't miss your EPS

    According to JPM;

    84% of S&P500 companies beat EPS estimates, this is very high. 70% of Stoxx600 companies beat their EPS estimates and 59% of Topix companies beat EPS estimates.

    With so many beating, the ones that are missing are punished severely...

    Earnings temperature check - don't miss your EPS
    Source: Refinitiv
    Pre market...Apple -4%, AMZN -1.6%, Goog +6.6%, FB -2%, TWTR -14%
    Borrow and buy the beach house

    15-year Mortgage Rate in the US hits another all-time low: 2.32%.

    Borrow and buy the beach house
    Source: Bilello
    Shitty timing...in size

    Berlin is opening the new international airport tomorrow. The project is delayed by almost a decade and is three times over the budget. Just in time for the German lockdown...

    Punting Ant

    TME outlined the Ant trade yesterdayhere.

    Today FT writes;

    “We will provide around HK$35-40bn ($4.5-5.8bn) for margin financing, or even up to HK$50bn in the case of popular demand,” said Edmond Hui, chief executive of Bright Smart Securities, a Hong Kong brokerage that is lending punters up to 20 times the amount they put down...

    Full articlehere.

    Sell your Apple (gadgets) and buy some sunshine?

    Apple vs IBEX YTD...(ex the Apple after hours)

    Sell your Apple (gadgets) and buy some sunshine?
    Source: Refinitiv
    Eurostoxx 50 - even dogs bounce

    European indexes have traded awful over the past week. Since breaking below the "summer box", SX5E has fallen quickly, reaching approx the range breakout px "target". 2900 area is big and is the break out level higher from May. Note the index is putting in a potential hammer candle so far today, right on the 2900 level.

    V2X (Eurostoxx 50 "VIX") has come up a lot over the past week, and is all but cheap here. Lock downs sure, but you have to decide how much you think this market is going to move daily going forward, not only the direction and at these vol levels market prices approx 2.15% daily moves for the DAX for the coming month (second chart showing DAX vol structure).

    SX5E vs V2X
    Eurostoxx 50 - even dogs bounce
    Source: Refinitiv
    DAX vol structure
    Eurostoxx 50 - even dogs bounce
    Source: Refinitiv
    German GDP SA (Q/Q) Q3 P: 8.2% (est 7.3%; prev -9.7%)

    German GDP NSA (Y/Y) Q3 P: -4.1% (est -5.2%; prev -11.3%)

    German GDP WDA (Y/Y) Q3 P: -4.3% (est -5.5%; prev -11.3%)

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