Via SpotGamma,

The link between options flow and the underlying shares is based on the concept that options dealers and market makers buy and sell shares of underlying stock to hedge option positions. These hedging requirements are generally measured through Delta (the number of shares required to hedge an option from the directional move of the underlying) and Gamma (the rate of change of Delta).

The impact of options trading on underlying equities is now well-accepted, following both the GameStop (GME) and AMC Theaters (AMC) saga of 2021, and the recent 0DTE flow affecting major US indices such as the S&P 500.

While there are now many documented cases of option flow driving stock prices, we also see examples where options activity is incorrectly blamed as a scapegoat for equity moves.

Case in point, last week the WSJ published an article titled: “Did Options Trading Fuel a 47% Plunge in Western Alliance Stock? The CFO Thinks So“. Let’s investigate:

The Setup

Western Alliance shares lost almost half their value in a single session last month. The bank’s CFO says options traders are partly to blame.

The shares dropped 47% to $26.12 on March 13, down from around $49 the prior session. Dale Gibbons, the bank’s chief financial officer, says a burst of put options trading—alongside thin activity in the pre-market session—was in part behind the move.

In the prior session, on March 10, options activity tied to the bank skyrocketed after almost no trading for most of the year, Cboe Global Markets data show. Mr. Gibbons says the aggressive trading, especially in bearish put options, helped drive the shares lower.

A snippet of what he said about put options trading on the bank’s earnings call this week is worth a read:

“To me, that’s somebody that had an agenda and then on Monday morning, before the market opens at 5 AM New York Time, they were in the pre-market session selling and nobody trades pre-market, so it’s pretty easy to move the stock price around and push it down, down, down.”

-WSJ

Bank Weakness Ahead of Move

Several days before the March 13th WAL crash, Silicon Valley Bank (SIVB, teal) was closed by the FDIC. These events placed heavy pressure on all regional banks as shown by the KRE price line (orange), leading to a -25% decline in that regional bank ETF. In sympathy, WAL stock dropped 50% the week of 3/8, which was before the stock fell another 50% on Monday, March 13th.

Options Volumes Reflected Bullish Support

Looking at basic volume metrics below, we can see that the options volume started to increase the week of March 6th, with a spike in options volume on March 13th. On the 13th call volume (blue) exceeded put volume (orange), as the stock opened at $12, and closed at $26.

Further, the stock traded higher in the following days. Since equity options don’t start trading until 9:30AM ET, it’s unlikely that options volume could have driven the opening low on the 13th.

Open Interest Confirms Limited Hedging Requirements

Is it possible that hedging flows from existing options positions were a major driver?

For that we first turn to open interest, and you can see that both put and call open interest are quite low until after the 3/13 stock lows. Low open interest implies less options related hedging is required.

Further, the call open interest exceeds put open interest as the stock hits those major 3/13 lows. The implication with this is that traders appeared to be looking to place more net long bets on the stock.

Gamma Analysis Aligns with Volume and Open Interest Assessments

To get an understanding of the possible hedging impact of options hedging flows, we looked at the maximum amount of stock volume that could be tied to WAL options. To do this, we convert the notional value of WAL options Gamma into equivalent shares for both puts and calls. As you can see there is a spike in Gamma-related volume the week of 3/8, but then Gamma goes to nearly zero, which signals a small options hedging impact on the underlying stock.

This reduction in Gamma is likely due to the fact that when the stock declined to lows <=$25, most of the WAL put options went deep in the money, and calls went out of the money. These positions require little to no additional hedging.

Stock Volumes Increased to Diminish Hedging Requirements

Adding to this, over the week of 3/8 WAL stock volume surged, as shown in gray. This suggests that the relative impact of WAL options hedging was additionally reduced, because options hedges would be a lower share of relative volume.

To depict this we’ve plotted the maximum possible shares required to hedge both puts (blue) and calls (orange). We’d note here that in all likelihood the related hedging pressure would be in actuality lower, as a portion of put and call positions likely offset each other, requiring less hedging.

Another way to see this impact is to look at the maximum possible hedging flow tied to open options positions on March 13th. This shows that the requirement is less than 10% of the stocks total average daily volume, at best.

Additionally the major spike in options volume appeared as the stock opened on 3/13 and, if anything, helped to rally the stock off of opening lows of $12.

Conclusion: Options Did Not Drive the Stock Lower

This data all serves to imply that put options were NOT a driver of the stock lows as suggested by the Western Alliance CFO.

*  *  *

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China is quickly becoming one of the largest automobile exporters in the world. 

In the first quarter of this year, the country’s exports were up almost 60% thanks to NEV shipments, Caixin wrote earlier this month. Data released mid-month by the General Administration of Customs showed that the country exported 1.07 million vehicles in Q1 – a rise of 58.3% from the year prior. 

The rise can be attributed to overseas shipments of new-energy vehicles (NEV), the report notes. NEVs surged 110% to 248,000 units, year over year, according to China Association of Automobile Manufacturers data.

In the top spot was Tesla’s Chinese unit, shipping out 92,000 units in Q1. It was followed closely by SAIC and BYD, who shipped out 56,000 and 39,000 units, respectively. 

The strong Q1 comes after China overtook Germany in 2022 to become the second largest exporter of vehicles, according to DirectIndustry E-Magazine. China, which exported 2.529 million passenger vehicles, up 56.7% from 2021, now only sits behind Japan. That report also noted the importance that NEVs played.

“Ten years ago, Chinese car producers, were only involved in ICE cars. Chinese car producers had to compete with established producers from Japan and South Korea. So, the focus was more on the fast-growing domestic market, and as for exports, it was mainly to developing countries,” said Bala Ramasamy, Professor of Economics, Associate Dean, China Europe International Business School. 

The pace at which China has emerged as a major auto exporter — and now a major net exporter of autos — is stunning.

1/3 pic.twitter.com/Fk7qNapAkb

— Brad Setser (@Brad_Setser) April 25, 2023

“Expect exports to continue to climb and the number of EV exports to dwarf ICE exports, specifically in the EU/UK where they will ban the sale of ICE vehicles by 2035/2030,” said Tu Le, Founder, and Managing Director of Beijing-based Sino Auto Insights.

Ramasamy concluded: “I think the fact that the Covid pandemic was quite contained in China in 2021 could have also given China and its production capacity an edge against its rivals in South Korea and Japan.”

Authored by Katabella Roberts via The Epoch Times,

Twitter CEO Elon Musk has accused the Democratic National Committee (DNC) of doing “far too much backroom dealing” amid reports that it won’t be holding any Democratic Party primary debates this year after President Joe Biden announced he is running for re-election.

Musk’s comment came in response to an April 25 post on Twitter by the “Young Turks” host Cenk Uygur condemning the move.

The DNC has “already announced that it will not allow any debates in the 2024 primary,” Uygur said. 

“Biden is not to be challenged. Everyone on the Democratic side must shut up and fall in line. Not having debates is undemocratic and ridiculous. No progressive should agree to this kind of power grab.”

We will do our best to support candidates from all parties, so that the public may make the most informed choice.

Far too much back room dealing seems to be happening.

— Elon Musk (@elonmusk) April 25, 2023

The DNC has not publicly stated that it will not be holding any primary debates in the upcoming election cycle, however, self-help author and Democratic presidential candidate Marianne Williamson posted on Twitter on April 24 that the DNC “plans no primary debates.”

“As though there simply ARE no other candidates … no other ideas we should discuss about ways to win in 2024, or other ideas we should discuss about ways to repair the country. Too many people are too smart to accept this,” she wrote.

Meanwhile, a recent Washington Post report states that the Democratic Party has “no plans to sponsor primary debates,” despite multiple candidates vying for the party’s nomination.

Twitter to Support All Candidates

At its winter meeting in February, the DNC declared, “We stand ready to help President Biden win both the primary and the general election.”

The Epoch Times has contacted the DNC for comment.

In responding to Uygur’s tweet, billionaire Musk said that Twitter will “do our best to support candidates from all parties, so that the public may make the most informed choice.”

Elsewhere, Musk responded to a similar tweet from Democratic presidential candidate Robert F. Kennedy, Jr.—the son of former Sen. Robert F. Kennedy and nephew of President John F. Kennedy—who has also previously condemned the DNC’s alleged decision not to hold any debates this election cycle.

“I have known and liked Joe Biden for many years, but we differ profoundly on fundamental issues such as corporate influence in government, censorship, civil liberties, poverty, corruption, and war policy, among others,” Kennedy posted on Twitter.

“I look forward to engaging him in debates and town hall meetings, in a primary election that is honest, civil, and transparent. I invite him into a new era of respectful dialog in these times of division.”

Biden Announces Another Presidential Run

Responding to the tweet, Musk declared, “You and other candidates deserve that opportunity!”

Musk’s comments come shortly after President Joe Biden officially announced his 2024 reelection campaign in a video on April 25 in which he took aim at what he dubbed “MAGA extremists” and declared that his administration had been fighting for America’s “freedom” and democracy since he took office.

“This is the United States of America and there’s nothing, simply nothing we cannot do if we do it together,” Biden stated in the video.

Commenting on Biden’s announcement, Republican candidate former President Donald Trump called him the “most corrupt president in American history,” while taking aim at soaring inflation, declining wages, the recent bank failure and energy crisis, all of which have occurred under Biden’s watch.

“You could take the five worst presidents in American history, and put them together, and they would not have done the damage Joe Biden has done to our Nation in just a few short years. Not even close,” Trump said in a statement.

While it is unclear if any Democratic primary debates will go ahead this year, the first Republican primary debate is set to kick off in August in Milwaukee.

Anthony Fauci has admitted that government vaccine mandates he championed fueled vaccine hesitancy, and were ‘counterproductive.’

In a wide-ranging interview with the NY Times, the now-retired Fauci admitted; “Man, I think, almost paradoxically, you had people who were on the fence about getting vaccinated thinking, why are they forcing me to do this?“

“And that sometimes-beautiful independent streak in our country becomes counterproductive,” he added.

Fauci’s comments come as fewer people are getting vaccinated for diseases that were once considered deadly in the United States, particularly among children’s vaccinations for measles, pertussis and polio.

As the Daily Mail notes, the percentage of kindergarteners in America who have taken their required immunizations, including the measles, mumps, rubella (MMR) shot, fell to 93% for the 2021-2022 school year, dropping to 2% below the recommended levels for herd immunity, and well below vaccination rates in 2020-2021.

And though approximately 66 percent of US children aged five months were up to date for all childhood vaccines recommended by the Centers for Disease Control and Prevention in 2016 through 2019, that number declined to slightly over 49 percent by May 2020.

In all, US adults and adolescents have missed more than 37 million routine vaccinations during the Covid pandemic, according to an analysis of insurance claims from health consulting firm Avalere. 

Many experts believe the Covid shot requirements fueled vaccine hesitancy that had been brewing in the US for decades. -Daily Mail

Fauci, who gave conflicting information in both public and private regarding the effectiveness of masks, and quashed dissenting opinions over the origins of Covid-19 when a prominent scientist suggested that it looked potentially engineered (at a lab the NIH was funding), is believed to be one of the architects of the federal mandates – such as those issued by the Department of Labor’s Occupational Safety and Health Administration (OSHA), the Centers for Medicare and Medicated Services (CMS), and the DoD.

In 2022, a review of vaccine mandates worldwide found that they could exacerbate cynicism and mistrust of the government.

“Compulsory COVID-19 vaccination would likely increase levels of anger, especially in those who are already mistrustful of authorities, and do little to persuade the already reluctant,” reads the review, published in BMJ Global Health. “Two experiments in Germany and the USA found that a new COVID-19 vaccine mandate would likely energise anti-vaccination activism, reduce compliance with other public health measures, and decrease acceptance to future voluntary influenza or varicella (chickenpox) vaccines.”

And in December, Cornell University found that mandates ‘eroded public confidence’ in vaccines even further.

“While significant percentages of vaccinated Americans and Democrats said that a vaccine mandate would make them more likely to re-engage in various aspects of pre-pandemic social and economic life, many fewer unvaccinated Americans and Republicans said the same,” wrote the authors.

The federal mandates have since largely been struck down or rescinded amid multiple lawsuits – with President Biden’s order that all federal workers be vaccinated having been blocked in court last month, while the Supreme Court issued a similar block on the private workforce in early 2022, the Mail reports.

In the fall of 2021, Fauci repeatedly defended state and private industry mandates for masks and vaccinations: “When you are in a public health crisis, sometimes unusual situations require unusual actions. In this case, it’s things like mandating, be they masks or vaccinations.”

The top-down push to get people vaccinated reaffirmed millions of Americans’ feelings that their personal autonomy was under threat and must be rejected wholeheartedly.

This bred widespread anti-vaccine sentiment, as many people believed cynically that the government was flexing its muscles to an authoritarian extent.

Nothing so effective could reasonably be made free for all; why would the government force the shots on the public if they failed to prevent infection; they were developed on such an accelerated timeline that there is no way they can be safe and effective; and any effort by the government to sidestep individual liberty must be sinister.

Vaccine mandates fed all of those arguments. -Daily Mail

And because of it, “you have that smoldering anti-science feeling, a divisiveness that’s palpable politically in this country,” said Fauci.

Authored by Ryan Zinke via RealClearPolitics.com,

There’s dignity and honor in work…

I was raised to value a good day’s work and to have pride in what you bring to the table. To be skilled at a craft was an honorable way to make a living whether you were a dishwasher or a surgeon. Work gave each of us a greater self-worth, purpose, and pride.

My father was the youngest master plumber in Montana’s history, and he came from three generations of men who valued and mastered their trade. I still feel pride when an old timer stops me in the street to tell me about the time my dad or grandad helped repair their home.

But now, well outside the global pandemic, our workforce has shrunk to levels not seen since the 1970s, far lower than during the Great Recession of 2008-2009. More than a third of men are out of the work force – the lowest in recorded history – thanks in part to the massive regulatory and welfare state created under COVID and the public health emergency.

Not a day goes by in Montana that you don’t walk down Main St and see a restaurant or shop with a handwritten sign that says “closed today due to staff shortage” or have to wait four months for a vehicle repair.

That is not the sign of a strong economy. It’s the sign of a struggling workforce.

Requiring able-bodied adults who do not have children to work 20 hours a week if they receive government benefits is prudent and hits at our core American value of pulling oneself up by one’s bootstraps.

Plus, it saves taxpayer dollars and grows the economy. According to the Wall Street Journal, “Medicaid work requirement for childless adults ages 18 to 64 could save the federal fisc nearly $170 billion over 10 years.”

You’ll see the president taking victory laps because unemployment is low; well, it’s low because under his policies people are being paid not to work. People are being incentivized with lax unemployment benefits and other welfare to stay at home and not contribute to our community and economy.

That has to end. COVID is over. Our nation is tens of trillions of dollars in debt, facing crippling inflation, a broken supply chain and labor shortage, insolvent senior benefits, and is about to run headfirst into a financial crisis. 

House Republicans have put forth a plan to make America work again, reduce the deficit, and put our nation on a healthy fiscal path. It’s called the Limit, Save, Grow Act.

This act, sometimes described in the media as a debt-ceiling plan, addresses the looming Democrat-created debt crisis by cutting excessive COVID spending, cutting regulations, and implementing pro-growth policies like a work requirement and energy permitting reform.

Limit, Save, Grow pulls back unspent COVID funds, saves money in areas where Democrats have continued to be frivolous which has caused spikes in inflation, and increases the flow into programs like Social Security and Medicare.

The work requirement, also known as the America Works Act, which I sponsored, falls under the “grow” area of the bill by incentivizing those who can work to pay into the programs to the caliber of their capability so they can continue to serve the purpose they were created for.

Work requirements aren’t new – they were implemented in 1996 and helped pull people up and out of poverty, lending folks a hand up while giving them the important work experience they need to grow a career and the American Dream. 

It encourages independence through employment. It makes able-bodied Americans a part of our economy and feeds the Social Security and Medicare programs until they are at least 65 and are eligible for benefits themselves. Reestablishing and enforcing the original system provide security for those who have continued to persevere and keep those programs alive and gets able bodies on the manufacturing and shop floor and off the couch.

When Americans work, our economy is strong. Our communities prosper and the programs that rely on strong employment like Medicare and Social Security are strong. Not to mention, the quality of life for those who get jobs improves for the long term.

There are a handful of vulnerable Senate Democrats in states that value a good day’s work – Montanans included. Voters in Wisconsin were just asked in a ballot question if able-bodied adults without children should look for work in exchange for benefits. It passed with nearly 80%. The House is set to pass this plan in the coming weeks, and I encourage the Senate to follow our lead.

Those who built my little hometown in Montana taught me that the ability to achieve success through hard work and enterprise was a core part of living the American dream; that if you had the ability to work, you should – and to do otherwise was un-American.

*  *  *

Ryan Zinke is a Republican congressman for Montana’s First District. He previously served as U.S. secretary of the interior and congressman for Montana’s at-large district.

Meta shares are soaring after hours after a top- and bottom-line beat extending gains (above one-year highs) since its earnings report on Feb 1st (and continuing to benefit from the AI bubble craze YTD)…

…Meta’s “year of efficiency” has meant mass layoffs and the stock price up 150% from its post-earnings (mid-Nov) lows. But has the price over-reached the fundamentals?

The Facebook parent was expected to post a fourth consecutive quarter of declining revenue and while META expectations are broadly optimistic, so is positioning which is one of the most long/overweight as the following chart of TMT positioning from Goldman shows (the positioning score= subjective ranking of investor positioning (1= max short/underowned … 10=max long/overweight) as determined by desk based on flows, positioning data, and feedback).

Finally, before we dive into the earnings report, the options market is implying a 10% move following results, compared with an average 14% move over the past two years

Meta’s top- and bottom-line beat expectations in Q1:

• *META PLATFORMS 1Q REV. $28.65B, EST. $27.67B

• *META PLATFORMS 1Q EPS $2.20, EST. $2.01

Under the hood, Ad Revenue beat:

• *META PLATFORMS 1Q AD REV. $28.10B, EST. $26.76B

• *META 1Q FAMILY OF APPS OPER INCOME $11.22B, EST. $10.32B

However, Meta’s outlook came in at the lowest end of expectations

• *META PLATFORMS SEES 2Q REV. $29.5B TO $32B, EST. $29.48B

But Zuck remains optimistic of course…

“We had a good quarter and our community continues to grow,” said Mark Zuckerberg, Meta founder and CEO.

“Our AI work is driving good results across our apps and business. We’re also becoming more efficient so we can build better products faster and put ourselves in a stronger position to deliver our long term vision.”

But Reality Labs (the Metaverse builders) saw a smaller revenue than expected and a bigger than expected operating loss:

• *META PLATFORMS 1Q REALITY LABS REV. $339M, EST. $613.1M

• *META 1Q REALITY LABS OPER LOSS $3.99B, EST. LOSS $3.8B

Facebook’s user data was mixed with daily active users up 4% (and better than expected) while monthly active users disappointed:

• *META 1Q FACEBOOK MONTHLY ACTIVE USERS 2.99B, EST. 3.00B

• *META PLATFORMS 1Q FACEBOOK DAILY ACTIVE USERS 2.04B, EST. 2.01B

Costs are undoubtedly in focus for Meta, and they’re narrowing their expected expense range for 2023 to $86-$90 billion.

That’s significantly lower than the $96-$101 billion initial projection the company gave in October.

Surprisingly, given the significant layoffs that have been announced, headcount was 77,114 as of March 31, 2023, a decrease of 1% year-over-year.

Substantially all employees impacted by the layoff announced in November 2022 are no longer reflected in our reported headcount as of March 31, 2023.

Further, the employees that would be impacted by the 2023 layoffs are included in our reported headcount as of March 31, 2023.

So layoffs affected 13% of staff.. but the total headcount is down only 1% – that’s a lot of hiring and firing in one year.

Meta shares are up 10% on the day now, at their highest since early April 2022…

Perhaps of most note, the word “metaverse” doesn’t appear until the boilerplate “forward looking statements” section at the bottom.

Here is the full META earnings presentation (pdf link).

Tucker Carlson has issued his first public comments since his ouster from Fox News for unknown reasons.

Appearing outside his Florida home with his wife, Carlson told the daily mail: “Retirement is going great so far,” adding “I haven’t eaten dinner with my wife on a weeknight in seven years.”

When asked about the future, Carlson said: “Appetizers plus entree,” before driving away on his golf cart.

Both Fox and Carlson have been mum over the split – however some are speculating that a lawsuit filed by a former producer, Abby Grossberg (who never actually interacted with Carlson) may be one of the reasons. Another rumor is that Rupert Murdoch’s ex-fiancee said Carlson was a “messenger from God” at a dinner, which freaked out old Rupert.

Murdoch and Smith called off their two-week engagement because Smith had told people Carlson was “a messenger from God.” Murdoch had seen Carlson and Smith discuss religion firsthand. In late March, Carlson had dinner at Murdoch’s Bel Air vineyard with Murdoch and Smith, according to the source. During dinner, Smith pulled out a bible and started reading passages from the Book of Exodus, the source said. “Rupert just sat there and stared,” the source said. A few days after the dinner, Murdoch and Smith called off the wedding. By taking Carlson off the air, Murdoch was also taking away his ex’s favorite show. -Vanity Fair

Carlson’s fans, meanwhile, plan to boycott Fox News and Fox Nation streaming service following the split.

Via the Epoch Times;

Carlson’s Fox Nation program had hosted numerous celebrity guests, including Tesla CEO and Twitter owner Elon Musk, actor Russell Brand, “Shark Tank” host Kevin O’Leary, and champion boxer Mike Tyson.

At least one Twitter user said Carlson’s show was the only reason they subscribed to Fox Nation and that without him, she had decided to end her subscription. “I canceled my @foxnation subscription tonight. I only watched Tucker’s show. They will not get another penny. Delete them, too. @FoxNews.”

Scott Morefield, a writer for the conservative Townhall.com also wrote: “I just cancelled my Fox Nation subscription with the note: ‘No Tucker Carlson, no Fox Nation subscription. Goodbye.’ Who is doing the same?” Morefield’s tweet prompted numerous others to reply saying they had done the same.

“Me renewal date was 4/27, so this was a convenient time to cancel. I had previously signed up for a 2 year subscription,” one person wrote.

As people announced they were ending their subscriptions, they shared screenshots and videos to prove they had indeed parted ways with the subscription service.

One user shared a screenshot in which she explicitly stated she was leaving the subscription service over Carlson’s departure from the network. On her screenshot, she had selected a box indicating her reason for unsubscribing, “Fox Nation doesn’t include my favorite Fox News personalities” followed by an additional comment, “As far I am concerned Fox is dead. Without Tucker Carlson you are just another [expletive] propaganda [mainstream media] outlet.”

Another Twitter user indicated Fox News’ other programs would not be enough to keep them interested in the network or its streaming service. “Just canceled my subscription to Fox Nation and promptly turned the channel. Only 3 shows interest me – The Five, Jesse Watters and Gutfled! And I can miss these without a problem. I never missed Tucker. What a loss.”

It’s unclear how many subscribers Fox Nation has lost in the day since announcing Carlson’s departure from the broader Fox.

Another day, another ugly macro print (durable goods orders – ex Boeing – far weaker than hoped for, and shipments slumped); more banking system anxiety (not helped by FRC threats); and even more debt-ceiling anxiety as Dems make it clear no matter what Reps offer, they won’t pass it.

FRC issued a blackmail threat to the other banks to ‘rescue them or face the wrath of the markets when we explode’ (our translation), but the market did not like and dumped the stock even more (down 35% today after yesterday’s 50% collapse). The FDIC didn’t help things by suggesting FRC’s Fed borrowings capacity could be cut (clearly in a play for force a public bailout and make the big banks – that face billions of losses from uninsured deposits given to FRC – to pay up for FRC’s loans)…

Source: Bloomberg

The KBW Bank Index tumbled back near post-SVB lows…

Source: Bloomberg

One stumbling block to a solution has been the conflicting needs of US officials and the banks that might help.

• The regulators favor a private rescue that doesn’t involve the US seizing the bank and taking a multibillion-dollar hit to the FDIC’s insurance fund.

• Banks want to avoid anything that damages their own finances and have been waiting for the government to offer aid, such as the FDIC taking control of the firm’s least desirable assets – something that can happen under the law only if First Republic fails and is put into receivership.

Not pretty but the T-Bill curve is breaking bad for a worst-case scenario X-Date…

Source: Bloomberg

And USA Sovereign risk has never been this high…

Source: Bloomberg

Nasdaq was the big winner today (thanks to MSFT and GOOGL) while Small Caps and The Dow led to the downside

VIX (normal, 1D, and 9D) all gapped down at the open – from yesterday’s spike – but that vol-selling faded around 1200ET (as puts were bid, sending vol higher)…

…as 0DTE traders piled aggressively into puts (while call plays were entirely muted (once again confirming Nomura’s Charlie McElligott’s recent note that there has been a regime-change in 0DTE from intraday-hedging/fading trends to an “accelerant risk”…

Source: SpotGamma

Value stocks crashed relative to growth today after chopping sideways relative to each other for the last three weeks…

Source: Bloomberg

This was the biggest growth/value daily shift since Nov ’22.

And ATVI was clubbed like a baby seal after UK regulators denied MSFT’s bid (MSFT rallied on the day BUT it was not moved by the ATVI decision)…

Treasuries were mixed today with the short-end lower in yield and the long-end underperforming (2Y -3bps, 30Y +4bps). Yields remain significantly lower though on the week with the short-end outperforming (curve steepening)…

Source: Bloomberg

The 2Y Yield tested up to 4.00% today but couldn’t hold it…

Source: Bloomberg

The Dollar ended the day lower but the session was a roller-coaster: down hard overnight then a sudden panic bid as US equity markets opened. The dollar index is higher on the week…

Source: Bloomberg

Crypto soared today, led by Bitcoin which touched $30,000…

Source: Bloomberg

Update: literally minutes after we prepped this chart, Bitcoin was clubbed like a baby seal…

Source: Bloomberg

Ethereum rallied but has been lagging Bitcoin in recent days…

Source: Bloomberg

Spot Gold ended lower on teh day after testing above $2,000 numerous times but unable to maintain it…

Source: Bloomberg

Oil prices fell once again, erasing all of the post-OPEC+ production-cut gains with WTI tumbling to $74…

Most notably, the WTI-Brent spread is now at its smallest (Brent compressing to WTI’s lower price) since Nov 2020…

Source: Bloomberg

Finally, Bloomberg’s Ven Ram notes that investors are erasing the distinction between the safest yields and speculative gains as conviction builds that the Federal Reserve will loosen monetary policy later this year.

Source: Bloomberg

The current earnings yield on the Nasdaq 100 basket is about 3.46%, equivalent to the yield available from 10-year Treasuries. That makes it the smallest equity premium since the early 2010s. A negative risk premium is typically tenable only if aggregate earnings are likely to see a techtonic shift higher or if interest rates are anticipated to slump a whole lot — say, more than 150 basis points within a short span of time.

The Biden administration has forewarned China that it plans to bolster military drills and the US presence in the region, particularly off the Korean peninsula where it’s decided to send nuclear-armed submarines as extra deterrence against North Korean threats aimed at Seoul. 

“We are briefing the Chinese in advance and laying out very clearly our rationale for why we are taking these steps,” a Biden administration official said. “We believe that non-proliferation efforts in the Indo-Pacific are in the best interest of not just the United States and other leading states, but China as well.”

“We’ll announce that we intend to take steps to make our deterrence more visible through the regular deployment of strategic assets, including a US nuclear ballistic submarine visit to South Korea, which has not happened since the early 1980s,” the US official detailed further as President Biden receives his South Korean counterpart Yoon Suk Yeol in Washington on Wednesday.

China was further briefed on US plans to “strengthen our training, our exercises, and simulation activities to improve the US-ROK [South Korea] alliance’s approach to deterring and defending against DPRK [North Korean] threats, including by better integrating ROK conventional assets into our strategic planning.”

“To build peace and stability on the Peninsula, during the visit, the alliance will be announcing a Washington Declaration which includes a series of steps that are designed to strengthen US-funded deterrence commitments and strengthen the clarity by which they are seen by the Korean public as well as by neighbors in the face of advancing DPRK [North Korean] nuclear missile capabilities,” the official added, previewing the Yoon-Biden talks.

Beijing is unlikely to react positively, given it’s also been of late vehemently protesting the US-Australia AUKUS deal to produce and transfer nuclear submarines. China last month warned the countries (including the UK) that they are heading down a “path of error and danger” and that Australia is violating commitments to being a nuclear-free zone. 

Elsewhere in the region, China has been closely watching US-Philippine largescale joint exercises…

On Basco Island South of #Taiwan, U.S. Military Prepares for Conflict With #China

Part of the largest-ever annual drills with the Philippines focuses on defending the strategic Bashi Channel, a key waterway used by the #PLA Navy to access the open ocean.https://t.co/bE7wZPyau4

— Indo-Pacific News – Geo-Politics & Military News (@IndoPac_Info) April 25, 2023

Despite the US framing its planned heightened nuclear presence in the Korean peninsula as “defensive” and “deterrent” in nature, China will surely see it as yet more provocative expansion of the US military machine it its own neighborhood.

The US Space Force granted Elon Musk’s SpaceX permission to lease a second rocket launch pad at a military base in Southern California, positioning the space company for its fifth launch site in the US. 

Under the lease, SpaceX will launch its Falcon 9, a reusable heavy-lift launch vehicle, to propel cargo from Space Launch Complex-6 (SLC-6) at Vandenberg Space Force Base, a military base just north of Los Angeles, into orbit. Musk’s space company has two other launch sites in Florida and a private Starbase complex in south Texas. 

“This is an exciting time for Vandenberg Space Force Base.

“This agreement will add to the rich history of SLC-6 and builds on the already strong partnership with SpaceX,” said Col. Robert Long, commander of Space Launch Delta 30.

Vandenberg Space Force Base

Space Force said the Boeing-Lockheed joint venture United Launch Alliance was launching Delta IV heavy rockets from SLC-6 until last year. SpaceX is likely positioning itself to launch weather-monitoring, military, or spy satellites with a southern trajectory over the Pacific Ocean. These types of satellites rely on polar Earth orbits. 

“SpaceX’s grant of Space Launch Complex-6 comes as rocket companies prepare to compete for the Pentagon’s Phase 3 National Security Space Launch program, a watershed military launch procurement effort expected to begin in the next year or so,” according to VOA News.