The VIX is back to 18, the highest level since May, and there’s $2.2 trn of longer-dated contracts maturing today, per Asym 500. The technical areas to watch are 4350 - 4400 for the S&P. You can see insurance is back in style, with the equity put-to-call ratio back at banking-crisis levels.
Also, L/S funds increased shorts in 8 of 10 sessions through Monday. August’s S&P is down around -5% (until this morning), so it’s gotta hurt for all those banks who finally went bullish at the beginning of the month, after keeping their bear suits on YTD until then. We’re looking at you, MS.
China’s real estate giant Evergrande Group filed for bankruptcy protection in the US. It’s trying to restructure in HK/Cayman. Their dollar bonds are governed by NY law, so it is not surprising but obviously creating one more nail in the China story coffin. China asked some funds to avoid net selling equities, some state-owned banks to support the yuan, and encouraging companies to perform buy-backs. Seriously, can you imagine that here in the US?
Estee Lauder lower profit estimates disappointed analysts. Its travel retail biz in Asia is having a tough time, and inventory is piling up. Management also pointed to slower recovery at US and Canadian retailers. L’Oreal is taking share, to their disadvantage. Management cut guidance in each of the past 3 quarters, which doesn’t usually bode well for investor confidence.
BBG is out with a story on a massive amount of abandoned electric cars in China. They’ve been sitting around so long that plants are coming out of trunks. Most likely the ride-sharing companies that owned the cars failed, or the cars were prior versions that were no longer in demand as new ones came out. But excess government subsidies about a decade ago ($8,400/car) are the real culprit, alongside restrictions on gas car ownership. It helped China become the leader in clean cars, producing ~6mm EVs and plug-in hybrids last year and accounting for ~60% of global cars. Now there are ~100 carmakers versus 500 in 2019.
Back at $26k. SpaceX sold its holdings after writing down $373mm, per the WSJ.
Bloomberg noted that US housing affordability is at its most challenging level in almost four decades because home purchases are so expensive.
Maybe we can play the short-term Treasury game a bit longer. Bloomberg quoted BofA warning of a ‘5% world’ as Treasury yields hit 12-year high that could remain sticky with intensifying inflation fears. On that note, Bloomberg stated that money market assets hit a new all-time high, luring cash away from stingy banks.