Not sure if you received a gazillion notes yesterday afternoon, flagging that the sender wasn’t sure why the markets were tanking here in the US. One reason given, zero-day options alongside overbought conditions, certainly contributed to the late-day selloff on Wed, per Bloomberg. Big put volumes probably made the option holders dump underlying equities. "Any guess seems as good as any other with speculations of market getting too long, macro comments in the Middle East, a 0dte options print, among many others. In any case, this unexplained move with vols 8.5 is wild," per the UBS trading desk. “1 week gone in 120 minutes...Between 2:00 and 4:00 PM ET today, the S&P 500 erased ~$600 billion of market cap. To put this in perspective, the S&P 500 added ~$600 billion of market cap over the last week. The index was up for 10 straight days but erased 5 of those daily gains in 2 hours.”
Citi is urging investors to buy the dips with “an eventual Fed pivot as a north star.” Well, we’re getting a bounce after yesterday’s trounce. Some new data out today. GDP rose at +4.9% in 3Q23, which was lower than expected. Initial applications for US unemployment insurance rose last week less than forecasted, near historic lows.
Most of the banks have come out with their 2024 forecasts, which no longer talk about a recession here in the US. But so many companies came out with negative flags and warnings in the last couple of months. A situation Reuters is flagging. We’ve been mentioning it for a while. Even Jamie D who usually is giving positive vibes warned us. The big retailers did too.
Anthropic is trying to raise $750mm in venture capital at a valuation for the private AI company at over $18bn. Last week I was at an interesting conference in Sacramento whereby some leading vc’s shared the belief that AI will be one of the most transformative advances in our lifetimes. For what that is worth. Which, I guess, is billions of dollars in current valuations.
The US is considering higher tariffs on Chinese goods such as EVs and solar-related products in order to support home-grown green companies, per the WSJ. They’re studying the effects now, so this is a 2024 potential event.
Two US-Mexico railroad crossings were closed because of smuggling groups’ use to move migrants. But it’s disrupting the >$28bn ag export market, with nearly 1mm bushels of grain exports potentially lost each day, per NOSO.
Remember the policy changes in the past few weeks by China? Well, their top cities are now experiencing a surge in home sales, per Bloomberg, after such a long, dismal run.
Schwab and other financial institutions are thinking about shortening the duration of their securities—not only to reduce interest but also to reduce the risk of paper losses in the future that could hit capital ratios. Mgmt is reviewing the broader issues of Mar 2023 (goodbye, FR and SVB) as well as its own issues at the time (turning to more expensive funding sources as depositors repurposed their cash for yield). New rules are changing the game for what hits their ratios, so mgmt teams are reviewing what they can do proactively.
Local activist Ubben is shuttering his ESG-focused investment firm, Inclusive Capital because he owned 3 of the 4 below. LPs don’t like losing money. Period. Full stop. No matter who you are. Also, ESG investing went out of favor, and investors don’t want to pay up for potential ESG improvements in the future that could perhaps close valuation gaps.
