"Skew Collapses on Upside Chasing...SPX skew collapsed to a 1-year low across tenors as investors sold out of hedges and rotated into upside calls to chase the rally. SPX 1M skew fell to its lowest level since mid-2024" www.cboe.com/insights/pos...

Rydex bears have been endangered since 2022. Long before leveraged ETFs, Rydex funds let traders lever up. This old-school measure of speculative positioning has stayed persistently bullish throughout this bull market. Friday, net long exposure hit a record ~93%.

SpaceX stock got cut in half, but retail investors keep piling in: Chart of the Day 'Retail investors have bought SpaceX (SPCX) stock every day since its IPO. The rocket company's first earnings plunge only brought them back for more.' finance.yahoo.com/markets/stoc...

'the consensus has over the past month meaningfully increased its near-term hyperscaler capex forecast, reducing expected free cash flow despite stronger operating cash flow forecasts.' www.apollo.com/wealth/insig...

'how bullish retail investors have gotten on the hyperscalers in recent months even as those names have struggled lately. Over the past month, call buying made up 55% of the retail opening activity in the hyperscalers on our exchanges – near the highest level in the past 6 years' buff.ly/BJzfuly

Wall Street's faith in rising profits hit a record. SPX fwd estimates are now farther above the previous earnings peak than ever, topping '87 & '21. These episodes haven't ended quietly. Rising volatility has often followed as earnings expectations & the mkt's rose-colored glasses begin to crack.

Margin debt has grown at 30% over the last 3yrs, narrowly missing the July '07 peak. This is the 10th episode in a century, placing today's appetite for leverage in an exclusive club. Remarkable considering margin is yesterday's tool. Investors have no shortage of new ways to speculate w leverage.

'During most bubbles, asset prices rose about 10-fold in real terms before a bear market began. In real terms, the Nasdaq 100 Index has already risen tenfold, while global semiconductor stocks have gained more than tenfold.' -Arthur Budaghyan, BCA h/t: @dailychartbook.bsky.social

Soaring demand for leveraged equity exposure is straining dealer balance sheets, pushing equity financing costs sharply higher and threatening to spill over into short-term funding markets. Soaring US Equity Funding Costs Risk Spilling Over to Repo Rates buff.ly/WeET5sD

We have officially moved into uncharted territory. Margin debt & geared funds relative to M2 money supply set a new record in May, surpassing the high set at the peak of the dot-com bubble. Never before have investors devoted such a large share of available liquidity to leveraged speculation.

Oops...typo on that first chart. Here is a corrected one.

Framing today's mkt: you can now earn a higher real yield from 30Y TIPS than the S&P 500's nominal cyclically adjusted earnings yield. Whether you consider TIPS truly risk-free or not, the opportunity cost of paying extreme multiples for equities has changed. Money goes where it is treated best.

SpaceX is reportedly valued at more than 90x sales and is worth roughly as much as the entire aerospace industry. Can a company exceed expectations when expectations already imply decades of extraordinary growth? At 90x sales, the margin for error and the margin of safety, are slim.

'A record 35% of stocks in the S&P top 100 now trade with inverted 3-month call skew...retail optimism in Tech is reaching a near record, with bullish trades making up almost two-thirds of all retail opening options activity in the mega-cap Tech stocks.' buff.ly/3k5CuAn

Margin debt (plus geared funds) as a percentage of M2 hit a new cycle high in April. Then came May's semi-mania...decent chance this ratio has now eclipsed the dot-com record, meaning investors are committing a larger share of available liquidity to leveraged mkt exposure than ever before.

Thirty variations of the Taylor Rule all point in the same direction: Fed policy remains accommodative. The current Fed Funds midpoint is roughly 180 basis points below the average prescribed rate. Even the most lenient model calls for a Fed Funds rate 75 basis points higher than today.

Margin debt growth hit 50% year-over-year in April, before May's semi-fueled melt-up. Speculative appetites don't run that hot very often. Over the last century, this is only the 15th episode in which margin debt growth exceeded 50%. 3Yr annualized margin debt growth is now the highest since 2007.

The Shiller CAPE Ratio appears likely to close May above 40x for the first time since September 1999. (CAPE smooths earnings over a full business cycle to gauge valuation.) Just a little more enthusiasm from the retail crowd and we may be revisiting a record many thought would stand for generations.

'Retail options traders have traded roughly ~2.8x their average daily semiconductor volume this month, nearly ~25% above the prior record set in June 2024, during NVDA’s stock split and run to surpass MSFT as the world’s most valuable company.' buff.ly/twiG5nO

Retail trading activity is on pace for the "most active month ever" - Scott Rubner buff.ly/twiG5nO

Single-stock leveraged ETFs now account for nearly 25% of leveraged ETF assets – up from almost nothing just a few years ago. And if these products were remotely about hedging, net exposure probably wouldn’t be at a record 95% long. Speculation is getting narrower, faster, and more concentrated.

"commercial electricity demand in the US is finally surpassing residential, largely driven by data centers and miners. Given the commercial's growing importance to utilities...residential customers' complaints are increasingly falling on deaf ears. " - Paul Kedrosky buff.ly/ZU14LGk

Stock market values tower over the economy...Total Market Cap (incl FDI) to GDP hit 3x. The higher valuations climb relative to GDP, the more the economy depends on elevated asset prices. A normal cyclical bear market could erase wealth equivalent to an entire year of US economic output.

Bond vigilantes got soft after decades of disinflation. The longer inflation refuses to normalize, the harder it becomes for bond markets to pretend otherwise. Inflation may be reminding them what they’re supposed to do.

Bullish Positionion in Stocks Reaches Extremes Record retail call buying in large-cap tech stocks has pushed options markets into a historically rare condition. Over 20% of the S&P 100 now exhibit inverted 3-month call skew - approaching 2021 meme-stock era extremes. buff.ly/Y4FPCKU

'We’ve seen a sharp uptick in call buying activity from retail investors on our exchanges, with over 52% of all retail opening activity in 10 mega-cap Tech stocks...up over 15 pts from last month and is the highest since the covid “meme stock” era.' buff.ly/u47TBdg

“BoA (Hartnett): Private client allocations are 65.3% stocks (highest since Oct’21), 17.5% bonds (lowest since Mar’22), 9.9% cash (lowest this century).” – Neil Sethi @neilksethi.bsky.social

‘retail investor equity flows on our platform sharply accelerated in April after experiencing a brief pause from the record inflows to begin the year. The net buying on our platform last week alone was in the 98th percentile of weekly flows since 2019.’ buff.ly/s0KPj52

"South Korea’s stock market has muscled its way into the world’s top 7, powered by an AI chip rally that has propelled it past two major markets in a matter of weeks." buff.ly/YXfXm3u

'Wall Street’s rebound since late March has been driven by the smallest number of stocks on record, pushing US market concentration to an all-time high and prompting warnings about the “fragility” of the rally' www.ft.com/content/7599...