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    Fed BS expansion far from extreme.....

    ....when measures as a share of SPX market cap

    Fed BS expansion far from extreme.....
    JPM

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    Gentle reminder as VIX trades at lowest since the Corona crisis...

    VIX loves spiking in August...

    Gentle reminder as VIX trades at lowest since the Corona crisis...
    BofA
    Apple risks

    BofA notes top risks:

    1, product gross margin pressure from higher BOM costs for the 5G iPhones

    2, unit volume risk in case of higher ASP

    3, tough compares in 2021 from massive App Store growth (unsustainable 30%)

    4, pressure on services GM - content amortisation costs

    5, lower share buybacks

    6, potential risks from higher tax rate if dems win

    7, Corona risks

    8, anti trust

    9, China trade risks

    US credit protection and S&P in tandem

    CDX IG inverted vs S&P showing no divergences.

    US credit protection and S&P in tandem
    Refinitiv
    Value continues to struggle

    MSCI World Value vs Growth –before the selloff, during the selloff, and in the relief rally

    Value continues to struggle
    JPM
    MSFT trying to come to a deal with Bytedance in 3 weeks according to CNBC...while Reels is launching in the US according to Instagram
    The Reopening Index

    How is has moved over time

    The Reopening Index
    Goldman
    GS US Reopening index moves closer to green

    "The reopening scale moves to a '4' as e-commerce, video conferencing and other stay-at-home categories moderate, while the return of sports and modest improvements in restaurants, ridehailing, and lodging aid back-to-normal"

    GS US Reopening index moves closer to green
    Goldman
    What is up (down) with China Money Supply?

    China M1 is key for most Cyclical plays...

    What is up (down) with China Money Supply?
    JPM
    Positive Q2 has lead to 2021 estimates being revised up
    Positive Q2 has lead to 2021 estimates being revised up
    SEB X-Asset
    Trump approval rating picking up steam
    Trump approval rating picking up steam
    Real clear poiltics
    Trump continues rebounding

    Time to revisit "what if Trump wins trade strategies"?

    Trump continues rebounding
    Real Clear politics
    ADP JUL US PRIVATE SECTOR JOBS +167,000
    Delta One
    Trump's bull chart
    Trump's bull chart
    GS
    The EURO: mother of all round-trips & a trip down memory lane

    "If you suffer existential problems on your birthday and sometimes wonder what you have been doing the last 21 years, you should probably not be reading the rest of this missive. Yesterday, when EUR/USD was trading at 1.1736, it was hard not to reflect back on the fact that the EUR started its existence in 1999 opening at, yes, 1.1736"

    Deutsche Banks FX
    Do you buy or sell Apple on BofA's downgrade?...price target raised from 420 to 470...states there are many positives for Apple, but risks as well...
    Daily changes in confirmed cases

    Some encouraging charts, some less...

    Daily changes in confirmed cases
    GS
    BofA: Gold to $3,000

    BofA Commodities team raised gold prices yesterday and today their equity colleagues that cover precious metals stocks are dreaming about even higher targets.

    BofA: Gold to $3,000
    BoAM
    Global equity ETF flows: Less interest in EM

    Japan is still in the doldrums.

    Europe is mehhh

    US is steady as she goes

    EM getting worse.

    Global equity ETF flows: Less interest in EM
    JPM
    Swiss national bank - the ultimate FAAMG catch up trade?

    The Swiss national bank even added to already longs according to the latest report from March 30. SNBN is listed, but volumes are extremely small...on the other hand remember the mania in SNBN in 2017 when the stock tripled in a few months.

    click arrow on chart to see top holdings...MSFT 28.4m shares, Apple 17..3 mill shares etc.

    SNBN vs Apple
    Swiss national bank - the ultimate FAAMG catch up trade?
    Refinitiv
    Top holdings according to latest filings
    Swiss national bank - the ultimate FAAMG catch up trade?
    Refinitiv
    Greenlight's quarterly letter: Comments on Tesla.
    Greenlight's quarterly letter: Comments on Tesla.
    Greenlight , Valuewalk
    Greenlight's quarterly letter: Comments on Tesla.
    Greenlight , Valuewalk
    Covid: More states are reporting declines in new cases and symptoms
    Covid: More states are reporting declines in new cases and symptoms
    CDC, CMU, Goldman Sachs
    5 of the 10 largest defaults this year is from the Energy sector
    5 of the 10 largest defaults this year is from the Energy sector
    JPM
    Option skew monitor cross-asset
    Option skew monitor cross-asset
    JPM
    ...and S&P gamma reaching "max" long gamma...implying less "erratic" moves for the Spuz
    ...and S&P gamma reaching "max" long gamma...implying less "erratic" moves for the Spuz
    Spotgamma
    ...and people are busy reducing loans on SPY...
    ...and people are busy reducing loans on SPY...
    JPM
      Swiss national bank - the ultimate FAAMG catch up trade?

      The Swiss national bank even added to already longs according to the latest report from March 30. SNBN is listed, but volumes are extremely small...on the other hand remember the mania in SNBN in 2017 when the stock tripled in a few months.

      click arrow on chart to see top holdings...MSFT 28.4m shares, Apple 17..3 mill shares etc.

      SNBN vs Apple
      Swiss national bank - the ultimate FAAMG catch up trade?
      Refinitiv
      Top holdings according to latest filings
      Swiss national bank - the ultimate FAAMG catch up trade?
      Refinitiv
      In gold we trust? - trading 24% above the 200 day average....last time it pushed this much above the 200 day moving average was in August 2011 when it traded some 26% above the 200 day

      Parabolic moves often end in tears, but this time is maybe different?

      In gold we trust? - trading 24% above the 200 day average....last time it pushed this much above the 200 day moving average was in August 2011 when it traded some 26% above the 200 day
      Refinitiv
      Robin Hooders - kings of silver as the metal spikes another 6%

      Every hedgie once again wishes they were RH...

      Robin Hooders - kings of silver as the metal spikes another 6%
      Robintrack
      Everybody long Apple but feeling a bit scared up here - why not "give them some calls" as VXAPL remains relatively high?

      Yes, Apple has its own "VIX". You can't trade it, but shows how vol Apple VIX remains elevated post the report.

      Apple vs VXAPL

      Everybody long Apple but feeling a bit scared up here - why not "give them some calls" as VXAPL remains relatively high?
      Refinitiv
      Skew remains elevated

      It is not the "real fear factor", but shows how expensive downside protection is relatively speaking.

      Skew remains elevated
      Refinitiv
      If you are looking for "vulnerable" Turkish exposure beyond the most "obvious" plays, look at Spanish bank, BBVA...full of Turkish exposure, and you get the sad European banking exposure "for free"

      BBVA earnings were horrible and stock is down big over past sessions, so selling it here could be tricky timing wise, but pay close attention to BBVA should the Turkish story gain more traction.

      TRY inverted vs BBVA
      If you are looking for "vulnerable" Turkish exposure beyond the most "obvious" plays, look at Spanish bank, BBVA...full of Turkish exposure, and you get the sad European banking exposure "for free"
      Refinitiv
      US 30 year - needs to break out soon as it trades very tight inside the formation

      1.2% is huge watch it, as well as the negative trend line around the 1.25% level.

      US 30 year - needs to break out soon as it trades very tight inside the formation
      Refinitiv
      There is only on Apple - up 100% from year low print (on the cent pretty much)

      Low print 212.61 X 2 = 425.22...closed 425.04

      There is only on Apple - up 100% from year low print (on the cent pretty much)
      Refinitiv
      Inflation obsession

      Albert Edwards points out very well in his latest note:

      "....shows how pointless it is to raise your inflation target if you were failing to hit your original and lower target in the first place! In addition to loss of credibility (or what crumbs of credibility you had left), you end up creating financial bubbles"

      The chart below is from the Fed paper we referred to earlier this year worth a read, "Raising the Inflation Target: Lessons from Japan"

      https://www.federalreserve.gov/econres/n

      Inflation obsession
      Soc Gen
      Fed can't stand spiking bond volatility - MOVE killed again

      Remember last year when the decrease in Fed's BS lead to a huge move higher in MOVE index (bond volatility). Fed was quick to reignite the expansion of the BS and MOVE eventually moved lower.

      MOVE is currently at all time lows, but low volatility must not stay low forever....especially not in rates space.

      Fed can't stand spiking bond volatility - MOVE killed again
      Refinitiv
      When is the big top in?

      Hartnett, who has been spot on so far, says:

      risk asset peak most likely at time of vaccine, full capitulation by bears, higher interest rates, see history of bear markets indicating SPX 3300-3600 top between Aug-Jan.

      Looks like bears need to sweat some more....

      When is the big top in?
      BofA
      Long EM stocks - the "forgotten" USD trade?

      (if you really must bet on the USD falling further...)

      EEM vs SPY ratio has been falling steadily as the DXY was getting stronger over past years. Recently even the youngsters have been buying gold as the USD has been imploding.

      One trade that has not taken off and is partly a USD play is the EM space.

      Below is the EEM vs SPY ratio and the DXY inverted.

      You can easily conclude that EEM continues to lag, despite the move in DXY.

      EEM volatility has fallen substantially, and is trading at very low levels compared to VIX on a historical basis, offering relatively cheap options plays on EM space.

      One simple trade with limited risk is buying the 45/48 EEM call spread in Sep, offering max payoff around 4.3X money.

      Another one is long EEM vs SPY outright.

      Click arrow on chart to see all charts.

      DXY inv and EEM/SPY ratio
      Long EM stocks - the "forgotten" USD trade?
      Refinitiv
      VXEEM
      Long EM stocks - the "forgotten" USD trade?
      Refinitiv
      Long EM stocks - the "forgotten" USD trade?
      Refinitiv
      Gamma levels to watch

      Note that a lot of large tech short gamma is expiring today. Short gamma crowd needs to buy the open to adjust deltas and most of the big tech were up "big" in after market. Interesting to watch how these big names behave later during the day. Remember short gamma can come into play should tech names trade down from open prints...

      Gamma levels to watch
      Spotgamma
      While at the topic of inflation - are we hedging the wrong tail?

      Frequent readers of TME know we consider Chris Cole of Artemis one of the better guys when it comes to thinking "beyond" volatility.

      This piece written years ago is somewhat technical, but provides some great insights into hedging and mispricing risks under a "hyperinflation" scenario. We are probably not there, but CBs have been very active and one should consider a small if at least...

      As Cole writes:

      "Print too little money and we cascade off the waterfall like the Great Depression

      of the 1930s... print too much and we burn like the Weimar Republic Germany in the 1920s... fail to harness the trade winds

      and we sink like Japan in the 1990s"

      Full must read note in case you missed it a few years ago, before Robin Hood existed....

      https://static1.squarespace.com/static/5

      While at the topic of inflation - are we hedging the wrong tail?
      Artemis Capital Management
      The inflation narrative (that is driving risk)

      GS explains the most important driver of risk, inflation expectations, in a very good way, key logic goes:

      1, Low levels of inflation priced by the market, Fed behind the curve, improving growth backdrop could further push break evens widening...pushing real yield even lower leading to continued bullish environment for risk and gold.

      2, Inflation expectations is the main driver of real rates which has been driving gold and stock multiples higher.

      3, As GS notes, "inflation expectations are still priced for a fat tail to low inflation into perpetuity", especially in Europe where 5 yr inflation exp still trade below 2016 lvls. As Europe has now been "fixed" there should be considerable room for EU inflation expectations to rally (they have moved higher recently, but still trade "depressed").

      4, When markets start pricing in behind the curve CBs, a move higher in inflation expectations can be sudden and violent.

      5, When it comes to global equities, EU stocks are the most sensitive to rates and inflation expectations.

      6, Conclusion leads to 3 trade ideas:

      1, long basket of EU inflation sensitive stocks

      2, Long 2y 110% SX5E calls (TME likes this one the best)

      3, The above but contingent on gold

      (click arrows on chart to see all charts)

      The inflation narrative (that is driving risk)
      GS EQ market strats
      EU 5 yr breakevens
      The inflation narrative (that is driving risk)
      Refinitiv
      SX5E vol structure
      The inflation narrative (that is driving risk)
      TME
      DB on Apple - raise pt to $440 from $400

      "...positives outweigh the (minor) negatives in the quarter, and we suspect that AAPL's

      confidence that such trends simply continue into the Sept-qtr could understate the reality that they could in fact strengthen, driven in our view by Mac, iPad, global

      normalization of demand aiding all segments.... new $440 P/T remains based upon a 25x CY21E P/E multiple"

      (click arrow to see more charts)

      Cash moving lower due to increased share repurchases
      DB on Apple - raise pt to $440 from $400
      DB
      iPhone rev
      DB on Apple - raise pt to $440 from $400
      DB
      Services
      DB on Apple - raise pt to $440 from $400
      DB
      What's hot and what's not

      One year performance, from above:

      Silver, Gold, QQQ, SPX, Eurostoxx 50

      What's hot and what's not
      Refinitiv
      European banks - will they ever revive?

      Europe has been "fixed", especially the periphery. Italian/German 10 year spread has gone one way pretty much over past months. European banks used to moved in tandem with the spread until recently.

      Recent earnings from some of the Southern European "components" of the SX7E have been horrible, but we ask ourselves if "credit" can perform and the "equity" (SX7E) lag by this much on a relative basis?

      SX7E vs Italy/Germany 10 year inverted spread.

      European banks - will they ever revive?
      Refinitiv
      S&P in Eur terms - believe it or not, but has done nothing since mid April

      Now that is a "summer box".

      S&P in Eur terms - believe it or not, but has done nothing since mid April
      Refinitiv
      Forget an equity correction?

      Latest AAII bullish reading showing bulls have given up....lowest since 2016.

      Forget an equity correction?
      Refinitiv
      This is the Europe people are so bullish on

      Dividends futs crashing, and index doing marginally better.

      Note div futs closing at lowest since late May.

      This is the Europe people are so bullish on
      Refinitiv
      SPY gamma flipping as well

      Just in time for the biggest earnings day ever...

      SPY gamma flipping as well
      Spotgamma
      VIX - just warming up?

      Many are referring to gold as (partly) a fear hedge, but we prefer our latest logic from 2 days ago much better. As we noted on July 28:

      "You do not buy gold here for the "fear" factor

      VIX looks like a more interesting trade for the "fear hedge"."

      VIX - just warming up?
      Refinitiv
      You can always panic and lend money to Switzerland for 50 years at -0.44%, Germany 5 years at -0.55% or Austria 100 years at 0.58%

      Truly amazing times...

      You can always panic and lend money to Switzerland for 50 years at -0.44%, Germany 5 years at -0.55% or Austria 100 years at 0.58%
      Refinitiv
      Mighty USD - the bear case is priced in

      Robin Brooks points it out clearly;

      "Interest differentials of the US vs trading partners are the lowest since 2012, so aggressive US monetary easing & reflation are more than priced..."

      Mighty USD - the bear case is priced in
      Robin Brooks