FOMO markets | Financial Times

good morning. After Unhedge's China Bonds note had landed yesterday, an editor from London sent an email to ask whether it is right to name the Evergrand-Kernkmelze China's "Lehman-Moment". I don't believe. In a Lehman Brothers moment to exaggerate something, all correlations go to one-everything is sold and everything everyone wants is cash. The sale in China remains concentrated for the time being. More about China shortly. In the meantime, send us an email: robert.armstrong@ft.com and ethan.wu@ft.com

fomo!

Here is a surprising series of facts published on Tuesday by the Bank of America share in -line teams:

"The S&P has (i) reached new highs on each of the last eight trading days and has increased the longest streak since 1964; (II) 17 of the last 19 trading days, a performance that was only exceeded once in over 90 years, and (III) for the second time since 1950, it took less than a month to recover from two fragility shocks."

The new high -high series broke on Tuesday, but the markets remain hot (a "fragility shock" is when a exaggerated market, which is characterized by overcrowded trades, suddenly). The Bofa believes that we are "afraid to miss the market": Investors only intervene in US shares if possible, out of fear of falling below their rivals because the market rages around the end of the year.

The campaign on the stock option market supports your view. On the one hand, cash flows in options for individual shares - $ 27 billion bonuses last week, a multi -year record that mainly demands:

The money flow is not everything. The premiums for calls that are far above the money have risen on the Nasdaq - the implicit volatility of the market has increased in the jargon - which reflects the strong demand for upward trends.

The insane rush to the market engagement is also reflected in the costs for roling S&P futures: Roughly speaking, this is the implicit "fee" that Market Maker collects for maintaining the futures position. The rolling costs vary depending on the supply and demand for market engagement and are close to a record value in this quarter, which is only competed by the rally after the 2016 presidential election:

All of these phenomena of the option market are a symbol for a "momentum chase," said Nitin Sakena from Bofa. "Due to the lens of the derivative market, there seems to be a lifted race for the upward trend..

I think for the first time I understand what is meant by this well-known Wall Street chestnut: "A small correction would be healthy here."

btc omg!

Bitcoin reached another high on Tuesday: $ 68,494, which corresponds to a market capitalization of almost 1.3 trillion. The cryptocurrency market is worth more than $ 3 trillion. Shiba Inu Coin - the second most important dog -based cryptocurrency - is worth more than Delta Air Lines.

a bladder? George Monaghan von Globaldata, an analysis company, believes that Bitcoin should not be the eight -largest asset in the world (directly between silver and Tesla):

“Investors give away Bitcoin in the hope that it will gain value instead of using it as a currency. The value of a product should increase because people use it, not because they invest in it. ..

"Bubbles have kept led to financial crises. While some may argue that the benefits of the technology justifies the reviews, I would ask how many Bitcoin owners could tell you what it is..

because of my sake. But Bitcoin's "market capitalization" of $ 1.3 trillion is not the same as Apple's market capitalization.

Firstly,

is an astonishing amount of Bitcoin that is included in this market capitalization. Cane Island Digital Research estimates that 28 percent of the offer was thrown away, stranded by a forgotten password or the dead owner or accidentally sent to a no longer valid. This implies an “available” market capitalization near $ 900 billion (Canane Island assumes that another 4 percent of the tokens available every year).

Market capitalization is also a misleading concept if it is applied to Bitcoin because the market is so strange. Under 20 percent of the offer are actively traded. According to Chainalysis, 85 percent of the dollar value are dominated by a few “waln” of the bitcoins that are traded. Bitcoin is something of a share with a large number of stocks and a very small free float: The price may not say much about what the asset would be worth if it had a less limited market structure.

Unhedged believes that people should be free to bet (and maybe lose) the house on Bitcoin. The question of the Bitcoin bubble that interests us is how much a devastating collapse of the Bitcoin price would affect other markets. We are not sure. (ethan wu)

ge rip!

General Electric split into three companies, and that's a big deal. During the majority of the late 1990s and early 2000s, it was the most valuable company in the world and was considered the best -managed company under Jack Welch. It turned out that there was no magical leadership sauce at GE. Most of the time there was a leverage, and the problems caused by the leverage effect took two decades (and even more) to remove them.

That was all predictable. I know that because my colleague John Plender predicted it in August 2000, when at the height of his pomp and prepared for retirement. Plender wrote in an FT column entitled "Geschen Hidden error":

"General Electric is the highest-rated company in the world with a market capitalization of $ 503 billion. Jack Welch, the chairman and CEO, who has led over two decades, is probably the most admired manager in the world. It can be his extraordinary dynamic and ability to resolve a man who has reinvented the company, which has reinvented the company, keep? "

At that time,

GE was known for his culture and management structure. But neither of them, Plender argued, had a lot to do with the growth of GE Capital, the company's financial department:

“In the five years to the end of last year, the contribution of the 28 operational business of GE Capital to the result of 36.7 percent to 41.5 percent and is therefore far more important than any other business.

"GE Capital dominates the group balance and makes 85.1 percent of the group's assets and 89.6 percent of its liabilities."

This in turn made GE vulnerable to financial shocks:

"At the end of last year [GE’s] The balance sheet contained $ 330 billion in property. would only require a decrease in the value of the property by 3 percent or the value of the claims by 5.9 percent in order to wipe out the property capital base of $ 9.9 billion.

"None of this means that the company will probably go broke tomorrow. But it is a very low security margin against recession and financial shocks."

made. Plender (and answered) asked the question that should be asked in every exuberant market: where is the lever?

Where is the leverage now?

a good reading

The Economist's visual explanation on various methods for measuring inflation and the proposed new measurement variable is good.