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    “Holiday Stocking Stuffers - 2020" - a few long term trades to consider by the creator of the MOVE index, Harley Bassman

    On Eurostoxx 50 Bassman likes:

    Buy December 2024 expiry SX5E call option, Strike = 3700 (~at-the-money)

    Sell December 2024 expiry SX5E put option, Strike = 2700 (27% out-the-money)

    Costless

    On gold he writes he is not a gold bug; Gold is not a trade; it is a twenty-year horizon asset diversification to hedge

    against a blimp-sized black swan landing in your backyard. A 5% allocation is

    likely dead money for quite a while, but I sleep well at night.

    For more trade ideas click the link,

    https://www.convexitymaven.com/images/Co

    “Holiday Stocking Stuffers - 2020" - a few long term trades to consider by the creator of the MOVE index, Harley Bassman
    convexitymaven.com

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    Net leverage ratios for the median IG and HY non-financial issuer are at or near all-time highs

    Net leverage ratios for the median IG and HY non-financial issuer are at or near all-time highs
    Goldman

    Fed's BS versus S&P since the restart of the "non QE" - spot the gap

    Fed's BS versus S&P since the restart of the "non QE" - spot the gap
    Thomson Reuters

    To hate puts here is not unique

    5 day average put call ratio needs little commenting.

    To hate puts here is not unique
    CNN

    Cash bond excess returns have lagged the equity rally quarter to date

    Chart: Year-to-date beta-adjusted excess returns of IG and HY bonds vs S&P 500

    Cash bond excess returns have lagged the equity rally quarter to date
    Goldman

    Oil break-evens

    Oil break-evens
    JPM

    JPM: Asian Foundries are now seeing a broad-based demand recovery

    1. Bullish times are back as capacity fills up across the board in 1H20

    2. We believe that Asian Foundries are now seeing a broad-based demand recovery, with capacity starting to fill up across leading-edge and trailing-edge nodes in 1H20.

    3. we also expect some margin expansion and price increase commentary in the supply chain in 1H20

    4. 1Q20 outlook likely to be extremely positive

    JPM

    Deal or no deal but S&P does not like sharply weaker Yuan and likes stronger Yuan

    Yuan is currently pushing new multi day highs. S&P to catch up?

    Deal or no deal but S&P does not like sharply weaker Yuan and likes stronger Yuan
    Thomson Reuters

    GS on OPEC

    we view most of yesterday´s headlines so far as falling short of consensus expectations:

    (1) Saudi has threatened to increase production if other countries do not step up compliance

    (2) despite this threat, other OPEC countries could not come to an agreement on allocation during their six hour meeting

    (3) there appears little discussion of an extension of the current agreement. Finally,

    (4) Russia's demand to exclude its condensate production from its quota could allow for an inconsequential decrease in its quota

    Nonetheless, yesterdays price resilience (and large speculative buying in recent weeks) in the face of disappointing headlines suggests that price risks are likely skewed to the downside today unless OPEC+ quickly generates consensus amongst its least compliant participants.

    Goldman

    S&P - trend channel since October lows intact, resistance 3130/3140, support 3110/3100

    We have recovered some 50% of the sell off.

    S&P - trend channel since October lows intact, resistance 3130/3140, support 3110/3100
    Thomson Reuters

    ChiNext - extending the bullish move, biggest 3 day move higher in a long time

    ChiNext - extending the bullish move, biggest 3 day move higher in a long time
    Thomson Reuters

    Yuan has not closed this strong in 6 sessions, last at 7.0342

    The EM equity inflow beat goes on....

    EM Equity Funds: ETF inflows persisted for the seventh consecutive week, albeit at a slower pace than last week (+$647mn, from +$1.8bn)

    EM total equity fund flows were +$405mn

    EU tobacco - cheaper than ever

    Chart: EU Tobacco, PE NTM to Europe Staples

    EU tobacco - cheaper than ever
    JPM

    The global auto industry

    Some market cap statistics:

    • Tesla: $60 billion

    • Uber + Lyft: $62 billion

    • General Motors: $51 billion

    • Daimler: $53 billion

    • Honda: $52 billion

    • Ford: $35 billion

    • Fiat Chrysler: $23 billion

    • Peugeot: $19 billion

    Bottom line: it is remarkable that a marginally profitable carmaker and 2 money-losing ride share companies can have larger market caps than most of the world’s major carmakers.

    DataTrek

    Google Pizza

    Returns since their IPOs in the summer of 2004:

    Google: +2,543%

    Domino's Pizza: +4,304%

    Google Pizza
    Bilello

    Both Microsoft (4.41% of the S&P 500) and Apple (4.29%) have bigger market caps than the entire US large cap Energy sector (4.25%)

    Thomson Reuters

    BTC: €6,666....

    December 16th, 2017: peaked to then half in less than 2 months

    December 16th, 2018: bottomed to then rally >300% over the following 6 months

    December 16th, 2019: ?

    The longer term BS chart

    The longer term BS chart
    Holger Zschaepitz

    Fed BS up $306 billion over the last 3 month.

    "In no sense is this QE. This is nothing like it." - Jerome Powell, Oct 8, 2019

    Fed BS up $306 billion over the last 3 month.
    Bilello

    End-Market Cycle Summary

    illustrates where each end market is in its respective cycle (peak to trough)

    End-Market Cycle Summary
    Morgan Stanley

    Standard deviation of GDP growth has declined

    Standard deviation of GDP growth has declined
    Barclays

    The snapback was limited...

    The snapback was limited...
    Barclays

    Gold and the Yuan - Gold loves weaker Yuan, but the Yuan is stronger over past sessions....

    Gold and the Yuan - Gold loves weaker Yuan, but the Yuan is stronger over past sessions....
    Thomson Reuters

    Remember the low volatility ETF, SPLV?

    Doing nothing since September...

    Remember the low volatility ETF, SPLV?
    Thomson Reuters

    VIX futures spread - zzzz mode

    VIX futures spread - zzzz mode
    Thomson Reuters

      “Holiday Stocking Stuffers - 2020" - a few long term trades to consider by the creator of the MOVE index, Harley Bassman

      On Eurostoxx 50 Bassman likes:

      Buy December 2024 expiry SX5E call option, Strike = 3700 (~at-the-money)

      Sell December 2024 expiry SX5E put option, Strike = 2700 (27% out-the-money)

      Costless

      On gold he writes he is not a gold bug; Gold is not a trade; it is a twenty-year horizon asset diversification to hedge

      against a blimp-sized black swan landing in your backyard. A 5% allocation is

      likely dead money for quite a while, but I sleep well at night.

      For more trade ideas click the link,

      https://www.convexitymaven.com/images/Co

      “Holiday Stocking Stuffers - 2020" - a few long term trades to consider by the creator of the MOVE index, Harley Bassman
      convexitymaven.com

      Fed's BS versus S&P since the restart of the "non QE" - spot the gap

      Fed's BS versus S&P since the restart of the "non QE" - spot the gap
      Thomson Reuters

      Recall last time the world IPOd an oil giant?

      Q4 2007: PetroChina IPO with market cap >$1 trillion, after a multi-year bull market. Equities also obviously peaked that same time.

      Q42019: Aramco IPO with market cap >$1 trillion, after multi-year bull market.

      Both oil stocks and totalitarian states also adds small in the juxtaposition analysis

      Recall last time the world IPOd an oil giant?

      Oil - has not closed up here since later September...and oil interest stays bullish

      Oil - has not closed up here since later September...and oil interest stays bullish
      Thomson Reuters/MPAS

      What is credit protection saying?

      Credit protection was not participating in the last squeeze we saw before this little sell off. We pointed out the short Eurostoxx 50 versus iTraxx trade being put on by "smart" prop books over past weeks. The trade has worked very well. Note how Eurostoxx 50 fell more relative to the iTraxx main (which has recovered the entire move lower).

      iTraxx main is inverted in the chart.

      What is credit protection saying?

      China - everything is just fine

      Speculative index number one, ChiNext, +1.8%, putting in one of the biggest candles higher in a long time. Chinese margin debt trading (biggest driver of equities) holding just fine.

      China - everything is just fine
      Thomson Reuters

      Have we just had the "blow-off" top?

      Bull markets often end with a euphoric rally called a ‘blow-off top.’ We may have just had one

      The Dow was up 10.5% over the course of just 74 trading days from mid-August to late November

      Ned Davis
      Have we just had the "blow-off" top?

      equities perfectly tracking curve inversion pattern

      S&P 500 Index performance after Dec 1988, Jun 1998, Dec 2005, and Aug 2019 initial 2s/10s curve inversion

      equities perfectly tracking curve inversion pattern
      JPM

      Why was Eurostoxx 50 so boring in November while S&P squeezed higher? - think gamma

      Up until last Friday GS estimates dealers were long 7-9 bn USD gamma. The effect was the "pinned" sensation we witnessed in Europe.

      For every 1% move in the SX5E dealer gamma needed to hedge (buy or sell) approximately 20k Eurostoxx 50 futures which is huge (40% of daily average volume).

      This gamma has now been "freed"...

      Why was Eurostoxx 50 so boring in November while S&P squeezed higher? - think gamma
      Thomson Reuters

      Long term earnings estimates re-set lower BULLISH!

      1. Long term (5 year EPS) expectations for the market have been cut sharply setting a low bar for future equity market performance.

      2. In March 2018, analysts were expecting 12.1% pa growth in EPS for the next five years. This is now 7.9% pa.

      3. Cuts of this magnitude have only occurred three times before: after the TMT bubble (a cut from 14% to 11%); after Lehman (11% to 6%) and during the Eurozone crisis (13% to 9%).

      4. periods of low expectations tend to be followed by high returns.

      5. At the sector level the most extreme view is for global mining where LT forecasts have been slashed to 0%, so in real terms to shrink over the next 5 years!

      Long term earnings estimates re-set lower BULLISH!
      Sanford Bernstein

      What if Hong Kong matters (more than we think)?

      Every bigger move down in S&P has been preceded by HSI moving lower. S&P has come off, but HSI is back to making new recent lows...

      What if Hong Kong matters (more than we think)?
      Thomson Reuters

      What risk is CTA running?

      While on the CTA carnage topic, below is the latest monthly report of the fund we track. VaR per asset; grey equities (big exposure), black total, bluew rates, green commodities, red FX.

      The way the CTA behaves, we can probably assume this is a good VaR proxy for the general CTA space..

      What risk is CTA running?

      VIX versus VVIX for some perspective

      VVIX was the leader, once again....

      VIX versus VVIX for some perspective
      Thomson Reuters

      The VIX guy is back - our number one contrarian indicator when it comes to volatility just outlined "why VIX should continue to rise"...

      ...frequent readers of TME know this guy still has a 100% track record, the inverted way. Before getting too excited, remember;

      "do not confuse pace with direction".

      The VIX guy is back - our number one contrarian indicator when it comes to volatility just outlined "why VIX should continue to rise"...
      Thomson Reuters

      Gentle reminder - the 2019 rally has been driven by valuation gains amid weak earnings growth

      Gentle reminder - the 2019 rally has been driven by valuation gains amid weak earnings growth
      Goldman Sachs

      Only thing making new recent highs (ex VIX) is Fed's balance sheet

      Only thing making new recent highs (ex VIX) is Fed's balance sheet

      VIX term structure - extreme shift over past days

      Needs little commenting, but demand for short term protection has surged.

      VIX term structure - extreme shift over past days
      vixcentral

      S&P versus US credit protection - similar to what we have seen in Europe over past weeks, credit protection has not been buying this latest rally

      S&P versus CDX IG (inverted). We usually show the European "trade" as our hit ratio historically is better in Europe than in the US.

      S&P versus US credit protection - similar to what we have seen in Europe over past weeks, credit protection has not been buying this latest rally
      Thomson Reuters

      VIX futures spread - big spike as people realise they need short term protection.....and picking up dimes in front of the steam roller strategy (vega neutral is not vega neutral more) stopped working abruptly

      VIX 2 vs 8 months futures spread.

      VIX futures spread - big spike as people realise they need short term protection.....and picking up dimes in front of the steam roller strategy (vega neutral is not vega neutral more) stopped working abruptly
      Thomson Reuters

      Was this the correction?

      If we are to follow the perfect 2013 pattern, the bounce should start kicking in soon, but maybe this time is different...

      Was this the correction?
      Thomson Reuters

      The gap between S&P and soybeans is big, but soybeans is not a China "play" only, do recall the stuff that has been going on in Brazil and other related EM currencies

      The gap between S&P and soybeans is big, but soybeans is not a China "play" only, do recall the stuff that has been going on in Brazil and other related EM currencies
      Thomson Reuters

      That was quick - equity volatility caught up to credit protection

      While equity volatility, V2X, was falling during November, iTraxx main was holding, indicating not all was as awesome as equity land was discounting. We can clearly see how this "gap" was closed yesterday as V2X blew out.

      That was quick - equity volatility caught up to credit protection
      Thomson Reuters

      Remember the credit protection versus Eurostoxx 50 futures "pro only" trade?

      European credit protection, iTraxx main, has been lagging the equity exuberance for weeks. The "dislocation" came in big yesterday. As we have written, "smart" prop desks have been putting on this trade, short equities, short itraxx main. The average Joe can not put these trades on as the credit leg is OTC only, but watch this relationship going forward. For now the "smart" guys are nicely in the money, let's see what happens from here...

      Remember the credit protection versus Eurostoxx 50 futures "pro only" trade?
      Thomson Reuters

      FED BS - highest since jan 9th

      Fed's balance sheet at $4.05 trillion, highest level since Jan 9, up $293 billion over the last 3 months.

      "This is not QE." - Jerome Powell

      FED BS - highest since jan 9th
      Bilello

      The dislocation between US corp profits and S&P Earnings has never been wider

      The dislocation between US corp profits and S&P Earnings has never been wider
      Sanford Bernstein