MBCC TH 17th February'23 - "The self-fulfilling rally that convinced bears to buy, but it is 0DTE delta flows, time to listen to Commodities/Credit/Bond markets - Ali Baba and Tesla as example!"

The rally that became self-fulfilling after the 10%+ surge this year sucking in all the “smart” hedge funds reluctant to buy it all last year, but now convincing themselves that the bottom is in “because charts look good!” And of course they are getting tapped on the shoulder from missing out! A justification used to invest here is that “Fed will engineer a soft landing (no landing even) and economy will revert to trend growth magically as Fed will cut rates eventually and we all live happily ever after”.

This logic is beyond absurd to us for the following reasons:

a) Last decade, the global economy has barely managed 2% growth with rates close to 0, and now with fed funds at 5%, we magically expect trend growth?

b) Historically when has the Fed ever been on a rate hiking cycle and magically started cutting rates without there being an “emergency”?

c) Bond market has been calling Fed’s bluff since November last year as the 2/10 and other parts of the curve even Germany, have been inverting even more aggressively, and we know Bond markets are smarter than Fed and Equity markets.

d) People are too scared to see their cash burn a hole in their pockets, they are too greedy to chase yield, when US Bonds at 4% are still more attractive than chasing cyclical Equities because they give you 4% yield, but are ignoring the EPS declines of 10-15% to come?

e) This rally has only come from MEME stocks, BTC, all the crap that fell last year, we can see how large cap cyclicals/economy sensitive names are down, why if there is a real genuine recovery?

People chasing today just look at charts…BUT charts can change in few days especially when Bonds/Credit/Vol/Equities do NOT add up with what real Physical market flows are telling us about the economy.

We break it down and we share NEW TRADING IDEAS as we see discrepancies across cross assets…SIGN UP!