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    Losing my reflation religion?

    1. Although US Equities made new all-time highs this week, the reflation trade that has been moving markets since early October is lagging in some corners, as evidenced by this week’s declines in EM Equities (-3%), EM Currencies (-2%) and Commodities (-2%), plus gains in DM Bonds and bond proxies (yen, gold, defensive equities).

    2. The catalysts have been a hodgepodge of random messaging from the White House around trade negotiations (the President noted on Nov 12th that tariffs would rise “substantially" without a trade deal; poor Chinese activity data (see Ng); and broadening domestic political stress from Hong Kong SAR to Latin America

    JPM

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    GS: Four factors will drive the economic acceleration

    1. The recent Fed cuts will boost US GDP in coming quarters as the effects of easier financial conditions flow through the economy

    2. Our economists believe that tariffs have peaked and that the drag on US GDP attributable to the US-China trade war is now abating.Their base case is that tariff levels on imports from China remain flat in 2020.

    3. The bottoming of the inventory cycle will also contribute to better economic growth next year.

    4. The resolution of several idiosyncratic events that have weighed on US economic growth in 2019 should provide an additional economic boost.For example, the GDP drag in structures investment attributable to the decline in oil prices should subside as oil prices stabilize. In addition, the GM strike resolution should lead to a rebound in auto output and boost to payroll growth as workers return to their position

    Goldman Sachs

    Volatility Index: lowest close since October 3, 2018. 11.94.

    To hate puts here is not unique

    5 day average put call ratio needs little commenting.

    To hate puts here is not unique
    CNN

    A fourth consecutive all-time closing highs.....

    Friday 77bp gain was the best day in 2 weeks.....

    Cross Asset YTD

    Cross Asset YTD
    JPM

    Hey Big Spender 3

    value of negatively yielding global bonds slumped from $17.0tn Aug 29th to $11.9tn today; great news for “value” stocks (especially European banks – but investors already asking when will rising yields induce volatility

    Hey Big Spender 3
    Hartnett

    Hey Big Spender 2

    since Lehman event government sector has borrowed $30tn, corporates $25tn, households $9tn, financials $2tn with central banks expected to support government debt, we say biggest recession risk is disorderly rise in credit spreads & corporate deleveraging

    Hey Big Spender 2
    Hartnett

    Hey Big Spender 1

    US federal budget deficit past 12-months exceeds $1tn

    note US govt not borrowing at 0%...pressure on Fed to underwrite rising government

    debt via inflation targeting, yield curve control, Modern Monetary Theory set to rise.

    Hey Big Spender 1
    Hartnett

    Gold vs Neg Yield stock

    Gold vs Neg Yield stock

    when do the WZ-121D Chinese battle tanks roll in?

    when do the WZ-121D Chinese battle tanks roll in?

    in 10YR valuation land everyone is sane...

    in 10YR valuation land everyone is sane...

    Double dipping?

    Double dipping?
    ML

    Cross-Asset; YTD

    Cross-Asset; YTD
    Goldman

    Cross-Asset; the week

    Cross-Asset; the week
    Goldman

    Global debt surged to a record $250tn

    what does the world balance sheet look like?

    That old man with a cane in Connecticut cannot be the creditor to all of this...?

    Global debt surged to a record $250tn
    Thomson Reuters

    Periphery all in

    Periphery all in

    ok boomer to Friends

    Over 100mn people tuned in to watch the League of Legends World Championship final in Paris (Nov 10).

    Volatility - so calm, so calm, but have no fear?

    VIX futures spread (below the 2 vs 8 months) continues imploding. The spread is approaching levels we have not seen in a very long time. We have gone from panic to calm pricing of risk in a few months only.

    People are once again lulled into strategies of picking up dimes in front of the steamroller as the short end of the curve is massively "hated".

    Stuff is not moving much, but gamma is becoming very inexpensive here.

    Volatility - so calm, so calm, but have no fear?
    Thomson Reuters

    On Singles day 2019, Alibaba’s GMV reached Rmb268.4bn (US$38.3bn), 2x the combined spend (US$17.8bn) on Thanksgiving Day, Black Friday, and Cyber Monday by US online shoppers in 2018.

    sick child is (moon-) walking again....

    Run Europe, run

    sick child is (moon-) walking again....

    All vols are red, again; VIX -6.5%, V2X -7.5%, VXN -7,5%, VXEEM -1,8%, TYVIX -4.4%, OIV -1,5%, GVZ -5,7%

    seriously, leverage is not a problem

    on the corporate level

    the powell prop book may be different story

    seriously, leverage is not a problem
    Goldman

    Vol when growth inflects higher...

    Vol when growth inflects higher...
    John Normand

    Going to the mattresses (with the bull market...)

    Going to the mattresses (with the bull market...)
    ML

      One of the best bull/bear indicators back to neutral

      Harnett's team pushed the long case very accurately when most were selling...

      One of the best bull/bear indicators back to neutral
      BofA

      Goldman really nailed the seasonality call in late October....

      ...and Yes NASDAQ has outperformed.

      Goldman really nailed the seasonality call in late October....
      Thomson Reuters/Goldman Sachs

      VIX futures spread collapsing further as demand for short term protection is out of fashion

      2 versus 8 months VIX spread.

      VIX futures spread collapsing further as demand for short term protection is out of fashion
      Thomson Reuters

      S&P - will it gain another 5% before 2020?

      "Our" 2013 pattern continues trading perfectly...but the air is getting thinner up here.

      S&P - will it gain another 5% before 2020?
      Thomson Reuters

      Credit protection not in agreement with equities

      iTraxx main inverted continues "lagging" versus the Eurostoxx 50.

      Credit protection not in agreement with equities
      Thomson Reuters

      QE or not QE....

      ...but the punchline in BofA's latest note sums it up rather dramatically:

      "some have argued, including former NY Fed President William Dudley, that the last financial crisis was in part fueled by the Fed's reluctance to tighten financial conditions as housing markets showed early signs of froth. It seems the Fed's abundant-reserve regime may carry a new set of risks by supporting increased interconnectedness and overly easy policy (expanding balance sheet during an economic expansion) to maintain funding conditions that may short-circuit the market's ability to accurately price the supply and demand for leverage as asset prices rise."

      BofA/ZH

      Melt up hedge?

      If you need to chase laggards or need melt up hedges, IWM , 35 delta calls look interesting. Short end of the curve is not expensive.

      Melt up hedge?
      Thomson Reuters

      Kill Vol - Eurostoxx 50 vol, V2X, another day with crashing vols, trades at 12.12

      We just received the classical mail from the sales guy that manages getting every turn in volatility on the wrong side.

      "Volatility will stay low because X, Y Z...." is the latest logic. He even speaks about the possible "break down" in volatility from here. We have been waiting for this email for weeks now....time to get busy.

      Kill Vol  - Eurostoxx 50 vol, V2X, another day with crashing vols, trades at 12.12
      Thomson Reuters

      Could Inflows Drive the Next Leg Up?

      Market Up Despite Outflows — Global equities are up 20% YTD despite $230bn of net outflows. This has happened in only two other years (2012 and 2016). In both instances, once outflows turned into inflows, global equities went up another c20% over the next 12 months.

      November Inflows Into EM and DM — 2019 has been the first year of simultaneous outflows from both DM and EM equity funds since 2011. But there are signs that this is reversing. November is on track to be the first month of inflows into EM and DM equity funds in two years.

      Could Inflows Drive the Next Leg Up?
      CITI

      Growth´s 13 good years....

      MS Equity strategist Mike Wilson thinks that Growth’s 13yr streak of outperformance vs. Value is over. He sees a two-step process playing out over an extended investment horizon, with growth's underperformance driving Part 1, followed by Value's outperformance driving Part 2, with a recession in between.

      MS’ economists aren’t making a call on the timing of the next downturn, but the current late-cycle environment won’t last forever, and investors should look ahead to the upcoming regime shift, given Growth is arguably less defensive than most people think

      Morgan Stanely
      Growth´s 13 good years....

      JPM: 3Q may mark a turning point in the global industrial cycle

      JPM: 3Q may mark a turning point in the global industrial cycle
      JPM

      JPM: Little in the technicals suggest the equity rally and pro-cyclical rotation have run their course

      1. The S&P 500 rally extends into a cluster of trend lines near 3,100, but shows little technical evidence that the trend is exhausted and at risk for a material downside reversal.

      2. Short-term momentum is overbought, but that alone is a poor predictor of increased risk for a setback.

      3. In our view, the lack of a clear trend deceleration pattern and extreme sentiment readings, and continued leadership from cyclically sensitive groups favor maintaining a bullish bias

      4. We believe a continued unwind of crowded defensive positioning that reached its zenith in August can carry the rally through the fourth quarter.

      5. Next stop 3225....

      JPM: Little in the technicals suggest the equity rally and pro-cyclical rotation have run their course
      JPM Techincal Analyst

      Gold - so far a perfect bounce in the lower part of the new negative trend channel

      Nothing too exciting, first resistance at the 1480 level. Note how gold volatility has collapsed over past weeks.

      Gold  -  so far a perfect bounce in the lower part of the new negative trend channel
      Thomson Reuters

      The gap between Eurostoxx 50 and European main credit protection index, iTraxx main, continues to widen

      Short term this is not a huge thing, but gaps like these tend to "come in". As we have explained before, the average Joe can't trade the iTraxx, but it is definitely worth watching this relationship.

      The gap between Eurostoxx 50 and European main credit protection index, iTraxx main, continues to widen
      Thomson Reuters

      Streamers - Netflix market cap 124 billion USD, Disney market cap 267 billion USD

      Streamers - Netflix market cap 124 billion USD, Disney market cap 267 billion USD
      Thomson Reuters

      Euro banks - yes, it is a leveraged play on German 10 year yield

      Euro banks  -  yes, it is a leveraged play on German 10 year yield
      Thomson Reuters

      GS: 10yr yield cannot go up

      Despite talk of tariff rollbacks and a generally favorable economic outlook, we believe a major portion of the bond market selloff is behind us. Our analysis suggests that 10y Treasuries will struggle to move sustainably above 2.2% (and above 2% without tariff rollbacks), largely on account of policy expectations having reset lower over the past year, and central banks signaling a high threshold for future changes

      Goldman

      Themes & Dreams

      Merrill 10 themes for the next 10 years.

      Themes & Dreams
      ML

      CTA update - need to buy more if vol stays low

      1. Coming into this week, GS Strats estimate US equity net length for the systematic trend community stands at +$43bn (vs. +$7bn 1-month ago)

      2. Baseline/flat scenarios still call for additional purchases in the US (and globally) – circa +$4bn for 1-week and +$23bn for 1-month scenarios coming into yesterday (GS expected scenarios broken down by market below). *Note – most of these expected purchases are a result of lower realized volatility.

      3. With SPX (and NDX / RTY) realized vol declining, it's worth considering what would happen in scenarios where this trend continues. Consider: if 3m realized volatility in SPX were to fall from 14v (last level) to 10v (Apr-May'19 levels), that would lead to additional purchases of $20bn of S&P over that time frame (and a combined +$12bn of NDX+RTY if they similarly dropped).

      CTA update - need to buy more if vol stays low
      Goldman

      Hedge Funds net short real estate stocks

      Have been shorting all the way up in the 2019 rally

      Hedge Funds net short real estate stocks
      MS PB

      Yuan is not the narrative at the moment, but bigger moves in Hong Kong and sharp moves in the Yuan tend to move in tandem

      HSI futures and the Yuan (inverted).

      Yuan is not the narrative at the moment, but bigger moves in Hong Kong and sharp moves in the Yuan tend to move in tandem
      Thomson Reuters

      European banks, SX7E, the dog of the day, -2.4% - bullets, we posted 2 days ago, on why the sector has got ahead of itself

      Via Autonomous

      1. The Eurozone banks have out-performed the market by 11% since mid-August. Calling the top in such rallies is more art than science given the sector’s tendency to overshoot (in both directions).

      2. Whatever the timing of the peak, we have high conviction this will prove to be another head-fake rally.

      3. First – and unlike in late 2016 – we believe earnings momentum will remain negative.

      4. Second, our Japanification thesis and fears of a US recession over the next 12-24 months make us inherently wary on the potential for sustained multiple expansion.

      5. In terms of stocks to sell at this point, Santander, Deutsche and Credit Agricole would be our key big cap avoids in the Eurozone

      TME comment - chase bank longs here looks late....

      European banks, SX7E, the dog of the day, -2.4% - bullets, we posted 2 days ago, on why the sector has got ahead of itself
      Thomson Reuters

      Trannies - still stuck in the grand range

      Chase it here?

      Trannies - still stuck in the grand range
      Thomson Reuters

      Lot of indecisive candles in Spuz lately

      Doji, shooting star, hanging mans....

      Lot of indecisive candles in Spuz lately
      Thomson Reuters

      buybacks are back

      1. we are now again in the full buyback open window - which typically coincides with a +35% pick-up in repurchase activity

      2. Q4 historically sees the largest amount of buyback concentration

      3. As US Economic Policy Uncertainty has recently dropped below its 35-year average, the market is again rewarding firms that commit to share repurchases.

      buybacks are back
      Goldman Sachs