Month: November 2018

US Rapper T.I. Sued After His ‘Token’ Allegedly Fails

Authored by Ana Berman via CoinTelegraph.com,

U.S. rapper T.I., also known as T.I.P., is being sued for $5 million by a group of people after his FLiK token has reportedly failed, according to court documents obtained by U.S. celebrity news media The Blast.

image courtesy of CoinTelegraph

As per the lawsuit cited by the outlet, the group of 25 persons claims that they have invested $1.3 million in “now worthless securities called FLiK Tokens,” promoted by T.I. and his business partner Ryan Felton. The plaintiffs state that the token was actively endorsed in social media both by celebrities and experts to create an impression of  “a valuable liquid investment.”

However, the group continues, T.I. and Felton defrauded them by using the money raised to drive the token’s price up, and when the prices fell down, they dumped the FLiK and disappeared. According to the lawsuit, Felton even created a new company, stating it had acquired FLiK and telling investors he had nothing to do with it.

Now the plaintiffs want to obtain a minimum of $5 million in damages from T.I. and Felon. The lawyer for the celebrity did not immediately respond to a request for comment on the matter to The Blast.

The FLiK was announced back in September 2017 and also actively supported by U.S. actor Kevin Hart, who promoted the coin on his Twitter. As U.S. tabloid TMZ reports, the promo campaign also mentioned Mark Cuban — a billionaire and owner of the NBA’s Dallas Mavericks. According to the stats provided by CoinMarketCap, the coin was traded at its peak on Oct. 17, 2017, when its price reached 21 cents. Seeing a brief takeoff in February, it slowly declined to nothing, traded at $0.001 as of press time.

Celebrities have often become involved in crypto-related activities from time to time, but their attempts and promotions do not always succeed. For instance, another U.S. rapper Ghostface Killah — a member of renowned Wu Tang Clan — co-founded an Initial Coin Offering (ICO) that hoped to raise up to $30 million. However, his Cream Capital was later suspended “with no plans to hold the token sale in the future.”

Floyd Mayweather, one of the world’s famous boxers and the highest paid athlete of his discipline, also engaged in an ICO, dubbing himself as Floyd “Crypto” Mayweather. Later in 2018, one of the coins he backed, Centra, was charged with fraud by U.S. securities watchdog SEC.

Another celebrity to recently join a crypto startup was Johnny Depp, who partnered with crypto-powered social entertainment platform TaTaTu. Cointelegraph reported in mid-October that the American movie star is going to team up with the TaTaTu founder in order to jointly create and produce film and digital content.

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Reuters Calls It: “Growth Stock Days Are Gone, Value Back In Play” 

Thomson Reuters research desk is ringing the proverbial bell in the stock market, saying “growth stock days are gone, value back in play.”

The report underlines how the latest leg of the most-extended bull market: buy the f*cking dip (BTFD) for growth stocks paid off, massively.

For more than five years, BTFD for shares of fast-growing companies like Facebook, Amazon, Netflix, Google (FANG) worked out very well, beating their value rivals by a margin of more than two-for-one in that span.

Until November came around.

Reuters said the wheels have literally “fallen off that profit vehicle.” The Russell 1000 Growth Index, which tracks stocks that trade at high multiples relative to their earnings, entered correction territories and or bear markets in October, warning that it was one of the worst months since the Great Financial Crisis. In that same period, the Russell 1000 Value Index is down only 7%.

“That shift was cast into sharp relief last week after major revenue shortfalls reported by both Amazon and Alphabet triggered the largest drops in their stock prices in years. Nasdaq, stacked with growth names from the tech sector in particular, is in a full-fledged correction – the term for a fall of at least 10% from the most recent peak.”

According to the Reuters research desk, the gap in performance between Russell’s growth and value indexes hit the widest level in 40-years (shown below on the Reuters Eikon Datastream via Chuck Mikolajczak).

Reuters said previous instances of widening eventually led to a turning point (Dotcom Bust), where value stocks like JPMorgan Chase, Exxon Mobil, and Johnson & Johnson benefited handsomely.

“When the rotation started to go back the other way, sort of reversion to the mean, value went on to outperform growth for several years. It was a longstanding reversion-to-the-mean kind of a trade,” said Phil Orlando, chief equity market strategist at Federated Investors, in New York.

From its Sept. 20 high, the S&P 500 is now down 9%, with the risk of entering correction territory, as heavily weighted sectors, such as technology and consumer discretionary, contributed to the nasty decline.

Both sectors have been crushed in the last three week and include growth stocks such as Amazon, and Alphabet, leading some analyst to believe a full-blown rotation into value stocks has already started.

According to FTSE-Russell data via Eikon, technology accounts for a weighting of nearly 35% in the Russell 1000 growth index, followed by an 18.8% weighting in consumer discretionary.

In terms of a forward price-to-earnings ratio, growth stocks remain expensive despite the recent downturn, making the argument for value stocks even more appealing to investors.

Steve DeSanctis, an equity strategist at Jefferies in New York, told Reuters that investors probably want to own value stocks now.

“We are starting to see earnings accelerate faster for value than for growth, and if GDP is going to be north of 3%, we should see a pretty good earnings backdrop,” DeSanctis said.

Reuters made the point that this month’s shift to value could be a “full rotation as the bull market enters its late-cycle stages, or merely a temporary defensive play,” similar to earlier this year when the S&P 500 tumbled into correction territory in February.

Julian Emanuel, a chief equity and derivatives strategist at BTIG, told Reuters that the current environment versus earlier this year is that the Federal Reserve is more determined in tightening the liquidity nose, which has resulted in higher yields on U.S. Treasury securities.

“Investor psychology has shifted to the idea that long-term yields are rising. When that happens it’s an implicit negative for high-multiple stocks, which tend to reside in the growth category,” Emanuel said.

Add Reuters to the list of research firms indicating that US tech stocks have reached the top.

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Hulu Anthology Series Into the Dark Offers Gruesome Fun: New at Reason

'Into the Dark: The Body'Hulu’s new anthology series Into the Dark offers a darkly comic slasher story in its first episode, The Body, more akin to Alfred Hitchcock than Rod Serling. Television critic Glenn Garvin takes a look:

The bloodshed is already well underway when The Body gets started. It opens with Halloween-night a shot of a bloody corpse at the feet of a dapper fellow we’ll soon come to know as Wilkes (Tom Bateman of last year’s Murder on the Orient Express), a renowned and rather cosmopolitan hitman. (Go-to conversation starter: recitation of Dante’s Inferno. Midnight snack of choice: casu marzu, a dish of Sardinian cheese and live maggots.)

Wilkes must deliver the corpse—it’s somebody famous, though we never learn exactly who—to his client, and after casing it in Saran Wrap, drags it downstairs from a penthouse, confident it will be mistaken for part of a costume. That works, but his car has been trashed into immobility by Halloween vandals.

To get a ride, he has to fall in with a collection of self-important and dazzlingly airheaded millennials, impressed by what they think is an amazingly realistic corpse prop. (“Super sick!” gasps one in admiration.) If he’ll stop into a hipster party and boost their cred, they’ll take him on his way.

View this article.

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Hot-Tempered Alec Baldwin Arrested After Parking Lot Assault

Actor Alec Baldwin was arrested on Friday following a dispute over a parking spot in Mahnattan, reports NBC New York. 

Law enforcement sources tell TMZ that the other man swooped into a parking spot Baldwin was waiting for near 10th Street and 5th Avenue. An argument ensued and Alec “punched the guy.” 

One witness tells us Alec yelled “F**k off” during the fight. Cops were called and Alec was arrested. Baldwin lives in the area. –TMZ

Baldwin was arrested in 2014 for disorderly conduct, and was acquitted in a battery case involving a photographer in the 1990s. 

In 2013, Baldwin chased a photographer outside his Manhattan apartment, calling him a “cocksucking fag.” 

Get away from my wife and the baby with the camera,” Baldwin can be heard yelling. “What fucking language you want that in?”

In 2007, Baldwin left his 11-year-old daughter Ireland a voicemail in which he called her a “rude, thoughtless, little pig,” adding “you don’t have the brains or the decency as a human being.”

The hot-tempered Baldwin continued: “I don’t give a damn that you’re 12 years old, or 11 years old, or that you’re a child, or that your mother is a thoughtless pain in the ass who doesn’t care about what you do as far as I’m concerned,” adding “Once again I have made an a** of myself trying to get to a phone. You have humiliated me for the last time with this phone.”

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Nigerian Army Justifies Killing Protesters With Trump Video on Stone-Throwing Migrants

Nigeria’s military today justified the deaths of Shia protesters using U.S. President Donald Trump’s remarks suggesting American soldiers might fire on rock-throwing migrants.

In a speech from the White House yesterday, Trump said U.S. troops—5,200 of which he deployed to the border earlier this week—won’t tolerate members of the migrant caravan who throw stones. “They want to throw rocks at our military, our military fights back,” the president said. “I told them to consider it a rifle. When they throw rocks like what they did to the Mexican military and police I say consider it a rifle.”

Indeed, there were reports of clashes between migrants in the caravan, which started from Guatemala last month, and Mexican authorities. According to the BBC, some migrants threw stones, prompting police to respond with tear gas.

The Nigerian Army, meanwhile, seized on Trump’s words. The army’s official Twitter account posted a clip of his remarks to Twitter, along with the caption: “Please Watch and Make your Deductions.”

The post, which seems to have been deleted, came days after Shia protests in Nigeria turned deadly. An Amnesty International report published Wednesday said 45 peaceful supporters of the Islamic Movement in Nigeria (IMN) were killed by the Nigerian military and police. Six people died after protests on Saturday, Amnesty International said, while 39 were killed on Monday.

“Video footage and eyewitness testimonies consistently show that the Nigerian military dispersed peaceful gatherings by firing live ammunition without warning, in clear violation of Nigerian and international law,” said Osai Ojigho, Director of Amnesty International Nigeria. The group also claims soldiers used automatic weapons on Monday.

The Nigerian military tells a different story. Just three protesters were killed, the military says, according to The New York Times. Meanwhile, AFP reports that the military says six people died. The video of Trump speaking, Nigerian defense spokesperson John Agim told AFP, “was posted in reaction to the Amnesty International report accusing the army of using weapons against pacifist [Shia] protesters.”

“Not only did they use stones but they were carrying petrol bombs, machetes and knives, so yes, we consider them as being armed,” he added.

According to the Times, videos posted to social media did show some protesters throwing rocks before being shot in the back as they ran away. But throwing rocks is not the same thing as shooting with live ammunition, said IMN spokesperson Ibrahim Musa. “Rocks are not equal to bullets,” he told the Times. “The use of force is disproportionate.”

The Nigerian military has a “long and disturbing history of violence,” as Reason‘s Nick Gillespie noted in 2015. Amnesty International reported in January that “more than 1,200 people have been unlawfully killed by the military,” with many of those deaths serving as “reprisals following attacks by Boko Haram.” Thousands more have been tortured, the group said. The country has a checkered history when it comes to human rights, so it’s not like we can blame Trump for the Nigerian military’s behavior.

But as with recent acts of domestic terrorism, we can criticize Trump for spouting dishonest, thuggish, and hateful comments that autocrats and terrorists alike cite to justify their own atrocious behavior. And should the U.S. military use disproportionate and deadly force against rock-throwing migrants, we certainly can—and should—lay the blame at Trump’s feet.

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Idiot Algos Panic-Buy Stocks (Again) As Trump Talks China Trade

After denials from three White House officials off the record and Larry Kudlow on the record, President Trump just told reporters that “China talks are going well” and he thinks “US will reach a trade deal with China.”

Trump added that he is “getting closer to doing something with China.”

The algos immediately panic-bid stocks…

Yuan also strengthened…

 

Are these markets seriously this fragile?

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It’s Not Just One Bad Apple. Little Rock’s Police Department Is Rotten Throughout

Josh Hastings“I mean, on some level it ought to be self-evident. You don’t hire a police officer who attended a meeting of the Ku Klux Klan. It feels ridiculous to even say it, doesn’t it?”

Those words of wisdom from Little Rock, Ark., Police Lt. Johnny Gilbert Jr., come toward the end of a sprawling review of the city’s shocking failure to hold its officers accountable for bad behavior.

In a heavily researched piece published today at the Washington Post, Reason contributing editor Radley Balko details a police department that appears to be full of bad apples, rotten down to the core.

It may be self-evident to us or to Gilbert not to give a badge to somebody who attends Ku Klux Klan meetings. Nevertheless, Little Rock’s police did, in fact, hire a man by the name of Josh Hastings, despite Gilbert’s warnings not to. Over the course of five years, Hastings showed himself to be a terrible cop, racking up a lengthy discipline record, culminating in the fatal 2012 shooting of 15-year-old Bobby Moore in a confrontation with the teen and two friends who were breaking into cars. Hastings claimed at the time that the boy had commandeered the car and was driving toward him. Forensics evidence later showed that this simply was not true.

Hastings was fired from the force and held personally financially responsible for Moore’s death. But he evaded criminal responsibility, likely due to lackluster prosecution efforts that Balko fully documents, and the City of Little Rock has so far successfully avoided civil liability for having hired Hastings and kept him on despite his many screw-ups.

It is the city’s and police department’s institutional accountability failures, not Hastings’ behavior, that Balko’s blockbuster takes to task. Hastings’ story is but a glimpse of a bigger, more serious problem. Little Rock’s police force is a nasty mess:

Disturbing as Hastings’s disciplinary record may be, other officers in the department have even thicker personnel files. In fact, many of the very officers who trained and supervised Hastings have had lengthy histories of misconduct — including domestic violence, lying, and the use of excessive force.

A review of LRPD personnel records, emails and court cases dating back to Hastings’s hiring in March 2007 suggests a department plagued by nepotism, cronyism and racism — both blatant and subtle. Internal investigations of officer misconduct can be sloppy and incomplete, and are often haphazardly conducted by officers with clear conflicts of interest. There appears to be little supervision at any level, whether by sergeants over beat cops, the high command over supervising officers, or city and elected officials over the department’s leadership. When officers have been fired — and it takes a lot to get fired — they are often able to appeal and win back their jobs, either in court or through the city’s Civil Service Commission, usually with the help of the police union.

A former senior counsel for the Justice Department’s civil rights division looked over the records Balko provided and observed, “The lack of discipline and accountability is almost comical.”

It’s probably less comical to be on the other end of the Little Rock police department’s fists, batons, Tasers, or guns. One officer successfully appealed a suspension for beating up a man at a restaurant (he had a lengthy history of punching people in situations that did not require force) with the remarkable claim that he had not been properly trained in alternatives to using force. The Little Rock Service Commission accepted this argument and reinstated him, finding that the officer (who had been a cop for 25 years by that point) was “being punished by the same people responsible for not preparing him.”

More shocking still is the possibility that he might have been telling the truth. Balko documents a failure by the department to properly train police to use less-than-lethal tools like Tasers and even simple batons, resulting in more than one instance in the use of deadly force when it wasn’t necessary.

II cannot encourage you enough to go read Balko’s whole thing. It is painstaking documentation of a police department that essentially needs to be (metaphorically) burned to the ground and rebuilt from scratch.

As a side note, much of Balko’s reporting was made possible by gaining access to police disciplinary records in Little Rock. Too many states and cities make it difficult or impossible to gain access to such records, which further allows bad cops to act with impunity. Thankfully, California just recently passed a law that will end decades of state-ordered secrecy of law enforcement personnel records.

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Beto Responds To Undercover Veritas Video; Insists Campaign “Above Board”

Rep. Beto O’Rourke responded to allegations by Sen. Ted Cruz (R-TX) that O’Rourke staffers have been illegally funneling campaign funds to help transport Honduran nationals traveling in the Central American caravan headed towards the southern US border.

In Friday comments, Cruz cited an undercover sting by Project Veritas in which O’Rourke campaign staffers Dominic Chacon and AnaPaula Themann appear to admit to facilitating helping transport migrants to airports and bus stations. 

Cruz referred to the video while campaigning in Fort Worth, telling a crowd of about 300 that “a video broke this morning of his campaign staffers taking campaign money and apparently using it to give it to people coming here illegally.” –Dallas Morning News

O’Rourke responded, telling the Dallas Morning News “We’re looking at this, but anyone who is trying to politicize this is trying to win an election base on fear. I want to make sure that we’re focused on the issues that matters most to Texas.” 

“I am comfortable that the campaign is above board, that everything is being reported to the FEC and I’m going to also make sure that I understand that’s going on, but from everything I’ve heard, that’s the sum of it,” added O’Rourke. 

James O’Keefe of Project Veritas challenged O’Rourke on Friday to “make the records public.” 

Staffers for O’Rourke were captured on undercover video telling O’Keefe’s undercover operatives amontg other things “Don’t ever repeat this and stuff but like if we just say that we’re buying food for a campaign event, like the Halloween events…” adding “I just hope nobody that’s the wrong person finds out about this.” 

Perhaps sensing that the Veritas video would cement a victory for recent Trump ally Ted Cruz, O’Rourke picked up an endorsement Friday from former CIA Director, John Brennan, who tweeted: “I believe Beto O’Rourke is the type of individual Texans need in the U.S. Senate to represent their best interests. He has the integrity, intellect, and character that is in short supply in Congress.” 

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$700 Million Hedge Fund Closes Most Of Its Positions

In a time when underperforming hedge funds – that would be most of them  – are doubling down in hopes of undoing recent losses and catching up to the S&P, and avoiding a flood of redemption requests, one fund decided to take money off the table.

Rhicon Currency Management – a $700 million FX-focused hedge fund – closed out most of its positions roughly three weeks ago, according to managing director Peter Jacobson. The fund’s intra-month strategy is “completely flat,” while roughly half of the money in its one-week-or-less book is invested, Bloomberg reports.

Why? One simple reason: according to Jacobson, “nothing looks compelling.”

The refreshing honesty from the hedge fund manager, who unlike his peers does not try to justify his fees by being invested at all times, comes amid recent turmoil in the US stock markets which however has failed to inspire volatility in the $5.1 trillion-a-day foreign exchange market, making life for traders especially difficult. With the “risk off” Yen refusing to act as a “risk off” currency – that honor has now been handed over to the Chinese Yuan, however good luck shorting it with the PBOC occassionally pushing overnight rates to a level that destroys all shorts – and the euro sliding as European growth has slowed to a crawl, Jacobson is steering clear. As for the US dollar, Rhicon believes won’t take another leg higher unless benchmark 10-year Treasury yields spike to 3.3 or 3.4%.

Jacobson said the firm doesn’t often completely shut down its positions. However, in recent years it’s become a more frequent occurrence as extraordinary monetary stimulus on the part of global central banks compressed volatility, not to mention made a mockery of fundamentals-based trading.

“Not trading is actually a trade decision,” said Jacobson. “I don’t see anything that makes sense to me, so there’s absolutely no reason why I should have positions on.”

Trading decisions such as this have served Rhicon well in 2018, a year in which the hedge fund is up nearly 5% even as most of its macro peers have stumbled. That compares with a nearly 4% year-to-date slump in a BarclayHedge index of currency trading programs, following a record 11% plunge in 2017.

According to Bloomberg, Rhicon was previously bullish on the dollar, a profitable trade for much of 2018 as the greenback gained over 7% since mid-April. In May, Jacobson also turned bearish on the Euro, expected the bulk of the dollar’s gains to come against the euro, a good trade as the common currency fell as low as $1.13 in October from a seven-year high of $1.2555 in February.

Now, however, the narrative is less clear: “With a four percent correction in equities, you would have thought that risk-off currencies would perform really well,” Jacobson said. “So I’m in a holding pattern until things become more clear.”

Looking ahead, Jacobson believes that should stocks continue to churn and a “real sense of panic” bleed across markets, his most likely next trade would be to short the USDJPY, even though the Yen has stubbornly refused to trade a risk-off currency in recent quarters.

In the meantime he’s content to sit the market out and keep his powder dry.

“There is always another trade, you just have to wait for it. But if you’re losing money, you may not have enough capital to trade that in the end,” he said. “So just be patient.”

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Nomura: ‘Jaw-Dropping’ Risk-On Surges Signal “Soul-Crushing” Stress In Stock Funds

We “cannot overstate the movement overnight” is how Nomura’s cross-asset strategy MD, Charlie McElligott, begins his note to traders today, reflecting that the markets’ moves are “blistering.”

From a macro-perspective, McElligott notes that it certainly looks like the accumulating “real pain” of the escalating trade war (as indicated in “wrong way” global PMIs / US ISM ‘New Orders’ declines vs leap higher in ‘Prices Paid’ / lower U.S. corporate margins per Q3 EPS / survey data amongst others), and ultimately, the sensitivity of both U.S. and Chinese leadership to the optics of tanking stock markets (ESPECIALLY into mid-term Elections in the US) – has forced what he would call “movement,” with reports late last night saying that President Trump asking his cabinet to begin drafting potential terms of a trade deal.

However, just as we are skeptical (and reports suggest correctly), McElligott notes that the sequencing of events (recent US Equities selloff and timing of said Midterm Elections) has SOME viewing this as another “scheme” to ensure a U.S. stock market rally into the Elections to boost the Trump platform.

Additionally, McElligott points out that the rumor coming from Trump’s side also now “boxes-in” Xi as far as high expectations for an eventual deal – which can then too position him as the “fall guy” if the “deal” ultimately falls-through, especially with the incredibly-complicated 1) “Intellectual Property” forced-transfers- and 2) competitive advantages via subsidies for Chinese SOEs – issues at the core of the spat.

Nevertheless, the markets moves are blistering:

  • Hang Seng closed +4.2% for its largest move since Nov 2011; HSCEI +4.0% for its largest move since Feb 2016; KOSDAQ +5.1% for its largest move since Sep 2011

  • In Germany, Autos are again +3.8%; in Europe Consumer Durables are +3.4% and Banks are +2.4%

  • The move in Yuan is jaw-dropping; the 2d move in CNY is now a -6.5 SD event back to the Chinese revaluation of Yuan / ending of the fixed Dollar peg in July 2005; CNH is seeing the 2nd largest 2d move since 2010 on capitulation from crowded shorts.

Separately, McElligott points out that the purported trade deal breakthrough came amidst two other “risk-bullish” catalysts:

  • Another pledged upgrading of Chinese stimulus measures for the private sector from President Xi at an “unprecedented” symposium with business leaders on Thursday, including substantial tax cuts and bailout funds, “encouragement” of bank lending and an “ordering” of local governments to “rescue” troubled private sector firms.
  • Reports that the U.S. is “said to” give 8 countries—including Japan, India and South Korea—oil waivers under the Iran sanctions to continuing buying their oil, in exchange for continued import cuts so as to not drive up oil prices—net / net a “growth lifeline” for Asian economies which need to import oil.

Incredibly lost in the all the bullish developments overnight was:

  • Another hawkish impulse from the Bank of Japan, which again “stealth tapered” purchases in the 3y-5y JGB bucket – this too is part of the selloff in global Rates overnight, not just the “risk-on” news-flow alone.

  • Similarly notable for the “Bearish Rates” trade per Darren Shames – BIG week-over-week decline in foreign custody holdings indicating UST liquidation flows, with the largest change since April and before that, Oct ‘16.

However, while mainstream business media heralds the gap-higher-opens and short-squeeze spikes as ‘wealth-enhancing’ for average joes everywhere (as if average joes were in the market), McElligott notes that these collective developments are potentially “soul-crushing” for Equities funds which have massively de-grossed / de-netted / de-beta’d their portfolio risk over the past month’s market calamity, literally low-ticking exposure in the period ahead of S&P Futures’ +6.2% rally since the Monday overnight lows:

  • Street PB data showed that Tuesday was the largest day of Equities L/S “gross-down” in 3+ years, selling longs (in ‘most crowded’ Comm Services, Tech and Healthcare) and covering shorts (especially ETFs)

  • Monday showed to be the largest underperformance in the top 10 ‘most crowded’ longs vs the SPX since 2010 on forced-deleveraging

  • Again per Street PB data, both “gross-” and “net-” exposures @ ~ 2 year lows, with 5Y delta-adjusted “gross” just 25th %ile and 5y delta-adjusted “net” at just 9th %ile

  • This speaks to my initial “point #1” a few weeks ago on the case for a re-risking move into Equities through year-end—that a “positioning-rinse” will PERVERSELY drive a violent mechanical “re-racking” of exposure from “first-mover” Systematic rules-based strategies, themselves too having de-risked throughout October (i.e. our CTA model showing “outright short” positions in SPX across 2w, 1m, 3m and 6m models through the end of the month)

  • This “lunge higher” exposure rebuild was only able to develop after Macro funds (who have gotten the “bearish Rates” trade correct and thus had PNL to “play offense” with) were able to profit on downside Equities hedges – which meant YARDS of Equities delta to buy over the prior 48 hours – and quickly pivot into outright “upside” expressions through early Dec—painfully, all ahead of the fundamental universe, which are collectively licking their wounds and “frozen” with redemption concerns

  • And thus my key observation over the past two notes: ULTIMATELY, the fundamental Equities community  (both MF and HF L/S) is now a massive “synthetic” short-gamma in the Equities-space, turning forced-buyers the higher the tape goes—and as expensive as options have become after last month, this means outright “spastic grabbing” of index futures and ETFs in an attempt to rebuild any semblance of exposure to this explosive gap-move higher

On a related note, McElligott warns that indications are that redemption flows and “unwind-y behavior” continues in the quant strategies universe…

VERY CONCERNING cross-asset “Momentum Reversal” price-action in the most-crowded CTA-Trend positions yesterday,  which could very reasonably be interpreted as REDEMPTION-related with proxy trackers of industry performance anywhere -6% to -15% YTD now

These strategies again proving to be more susceptible to “crowding risk” than their “risk diversification” marketing claims, as the market regime shift’s ”rolling vol events” chops their “calm-dependent” strategies

Yesterday’s most obvious “Max” position liquidation candidates:

  • All “long USD” tied trades were nuked, as our model showed recent re-accumulation of “Max Shorts” URUSD, GBPUSD, AUDUSD and NZDUSD / “Max Longs” in USDJPY, USDCAD, USDCHF, USDNOK, USDSEK, USDCNH which all traded violently “backwards” yesterday

  • Gold and Metals (both precious and industrial) had recently again moved-back to “Max Short” status, but yesterday and again today continue squeezing powerfully higher (Gold a +3SD move yday, while the 2d move in Industrial Metals is a +2.5SD move relative to past year’s returns)

  • “Max Long” in Brent Crude being destroyed, with the prior 4d move a collective -2.5SD drawdown

Additional assets “at risk” going-forward from CTA redemption flow:

  • MAX SHORTS in Eurostoxx, DAX, CAC40, Hang Seng, HSCEI, ASX, Kospi, Nikkei; EUR / JPY / GBP/ AUD / CAD / NZD / NOK / SEK / CNH; ITA 10Y; Industrial Metals, Precious Metals

  • MAX LONGS in Brent Crude; EUR 10Y, JPY 10Y, GBP 10Y, AUD 10Y, CHF 10Y, FRA 10Y

And remember when in my mid-June structural / trading behavior “Downshift” note, where the macro regime shift from “Cyclical Melt-Up” into the much more difficult “Financial Conditions Tightening Tantrum” meant that the trading environment too would then transition from a period of “high Sharpe” directional trades to instead a hyper-tactical stance, with called for monthly “mean reversion” trades / hedges?  Well….yesterday exemplified that perfectly within the Equities quant space, with widespread “stress” apparent–

Yesterday’s U.S. Equities factor-behavior was indicative of “stress” as well – as we have discussed to pain seen in some high profile “quants” YTD:

  • “1m Price Reversal” factor finished +3.5% for its largest move since Nov ‘17 and now +7.0% QTD; the return was almost entirely from this month’s “Reversal Longs,” meaning that the largest “losers” of last month’s capitulation via de-gross, de-net and tax-loss selling were the biggest “winners” yesterday

  • “1Y Momentum” was crushed -2.5% on the session, its 10th ~-2SD move since late June

  • Recently defenestrated “Beta” and “Volatility” exploded higher, +2.5% / +3.6% on the day respectively—largest 2d positive move in “Beta” (+5.5%) since the U.S. Election, largest 3d move in “Vol” (+7.7%) since March ‘16

  • “Size” factor (small cap over large) saw a +3.6 SD move, largest since Nov ‘16

  • “R&D / EV” factor sees a +3.1SD move, largest since April ‘16

  • “Conditional Reversal” factor sees its 5th largest move in its history

  • “Default Risk” factor largest move since Nov ‘16

As we noted previously, volatility is not going away as this stress, de-risking, and re-rising panic is far from over.

 

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