Aside from the ever-escalating Roman Circus spectacle, the two main casino themes were "ignore record low volatility" and "buy Europe with both hands". Now I will show why those were very bad ideas...
First, volatility:
Recall my frequently shown chart on C&I loans, well I updated it to use quarterly data, cited in the article above, which has now turned negative for the first time since the last recession:
Bank lenders are getting worried about the economy, but investors seem carefree about Wall Street
The CBOE volatility index closed Monday at the lowest level since December 1993, but BofAML found that Wall Street's fear gauge should be much higher because of its past correlation to an obscure measure of economic growth. Demand for commercial and industrial loans, a leading indicator of growth, dipped into negative territory in the first quarter, Merrill Lynch said, citing the latest Federal Reserve Senior Loan Officer survey. Merrill found that periods of low loan demand have in the past been mostly associated with rising volatility, but that's not happening now.
It thus appears that the key post-election story continues — i.e. while optimism is high everybody is in wait-and-see mode pending details on tax reform from the new administration...The longer this lasts the greater the risk of more weakness in hard data."
The weekly bank chart above, is this one (daily):
Loans with VIX:
Now on to Europe, post-Macron...
When it comes to fund flows, bear in mind that for every buyer there is a seller and European stocks were down on the week despite record inflows. Hence "momentum" as defined in this article is defined as number of lemmings running off a cliff...
European equity weekly fund flows ($billions):
Any questions?
"Earlier this week, Jeffrey Gundlach, the chief executive of DoubleLine Capital, said that European and emerging markets equities are more attractive than U.S. equities."
"I'd rather much be overseas than in U.S.,"
More roadkill:
I was blown away yesterday when Cuban came on 'Fast Money' and was asked whether it bothered him that four stocks — Amazon, [Alphabet's] Google, Facebook, and Apple — now account for $2 trillion in market capitalization. His answer? 'In terms of stock price?' he said. 'No, they are all undervalued.' Undervalued?
Cuban's reason for being bullish is simple: the tech giants are well positioned to expand and do business in the areas of machine learning and artificial intelligence.
WolfStreet:
Artificial Intelligence visualized:
"optimism is high everybody is in wait-and-see mode pending details on tax reform from the new administration"
"Moody's is concerned about Canadian banks, but investors should just relax, every dip is a buying opportunity"
"It's unlikely that banks can suffer a big downturn without other sectors suffering as well. In other words, if you are worried about your bank stocks, you have to wonder about the rest of your holdings too. The better option, stay put"
Global investors are still shaking off a rout that’s erased more than $560 billion from the value of Chinese equities, making them the world’s worst performers since mid-April. Outside of the nation’s borders, investors are indifferent to the weakness in the second-largest equity market after the U.S.
The investment bank forecasts returns on commodity prices on the order of 13.3 percent over the next three months and 12.2 percent over the next 12 months.
Read the story immediately above, again...
