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Planet Earth
Joined December 2012
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Implied volatility markets are not pricing midterm results to be a big event. The forward volatility market is implying just a ~1.2% move in the S&P 500 Index tomorrow. That’s below what was implied one day ahead of 3 of the last 4 midterm elections. And it’s below what the S&P 500 realized after the 2018 and 2022 elections.
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Today marks only the 2nd day this year that retail investors have been net sellers. MS QDS estimates, based on public data, that retail investors sold $1.4bn of US equities today — their first net sale since April. This is after retail has bought more than $1 trillion of ETFs and stocks YTD.
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The unwind in Hedge Fund equity exposures this year has been the biggest since at least 2017. Active de-grossing (reduction in long + short positions) by global hedge funds has now hit over 8% of total gross exposure since June, according to the Morgan Stanley Prime Brokerage Content team. This has taken gross leverage for US long/short funds down to the 10th percentile versus the last year.
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The PPI-CPI Gap Is Wide, and It Rarely Stays That Way Producer prices are surging, and it’s unlikely firms can absorb this through margins. Headline PPI +1.3% m/m, the strongest in 4+ years, and +6.4% y/y. Core PPI (ex food, energy & trade services) +0.5% m/m, +5% y/y, the fastest since 2022. The PPI/CPI link is loose, but core PPI this hot rarely fails to pass through to core CPI.
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At Morgan Stanley Equity Derivatives, deep, trusted, long-standing partnerships with the world's top investors are the hallmark of what we do. Iliana Bouzali, Global Head of Derivatives Distribution and Structuring, sits down with legendary investor Stan Druckenmiller at the TomorrowX Summit on November 17-18 in Austin to explore macro, markets, the thinking behind the trades, and what the future may hold.
Taking the stage at @TomorrowXSummit: Stan Druckenmiller (@standuquesne), Chief Executive Officer of Duquesne Family Office, and Iliana Bouzali (@ilianabouzali), Global Head of Derivatives at Morgan Stanley (@MorganStanley) $MS. November 17-18 at the Moody Center in Austin. Hosted with @GavinSBaker and @atreidesmgmt, @antoniogracias and Valor Equity Partners, @rbiscardi and @iconnections_io. Registration link below.
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In an AI world, the most valuable investing skill will be … “creativity." Justin Lubell of @Citadel talks conviction and the role of human judgment. Watch his full Break the Playbook conversation with @MorganStanley Derivatives. mgstn.ly/4imYQgm
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The goal is “intellectual conviction as opposed to emotional conviction.” @Citadel’s Justin Lubell joins Break the Playbook to discuss finding top talent, backing ideas with intellectual conviction, and why investing remains a deeply human business. Watch the trailer:
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The rally in S&P 500 has the index hitting the peak dealer gamma wall of $24bn near 7845 in spot, per MS QDS. But much of that dealer long gamma expires today. Absent new customer supply, that stabilizing force gets smaller, leaving the market freer to move.
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Maximus retweeted
Replying to @super_macro
Thank you for this. However I would caution against falling in the easy “Le Pen vs Melenchon” narrative which is not representative of what the betting markets are telling us. David Lisnard has been making huge strides lately and is fiscally very conservative/responsible. He’s the French Milei (and so is @knafo_sarah but unfortunately she is not running). He’s just not polled (yet) bc started from too low.
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Maximus retweeted
1/ There's a scary chart going round on X: junk bonds ($HYG) at a 52-week low while $SPY sits 1.4% off its record. Scary, because credit markets are usually much better at sniffing out trouble than equity markets. Anyway, I pulled it apart. BlackRock runs a version of $HYG with the Treasury risk hedged out ($HYGH). Over the past year HYG is down 4.1%. HYGH is down 0.4%. So about 90% of HYG's damage came from duration. The part that prices default risk has barely moved, and junk spreads sit 13bp from 3-year tights So the scary chart is mostly bond maths. The basement of the junk bond market is a different story however 👇🏻
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The 15-month rate of change in FINRA debit balances, a proxy for margin-driven speculation, has dropped back below 60%. In prior cycles, this has coincided with major market tops.
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Watch @davidein’s full conversation for Break the Playbook, a series from @MorganStanley Derivatives with investors who challenge conventional thinking. David talks everything from how he plays poker, the signal from macro and fiscal risks, the future of AI and more. mgstn.ly/4j928oj
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From poker investing lessons, to what he's changed his mind about, how he invests in AI, and the personality trait that has made (and lost) him the most money, @davidein and Iliana Bouzali cover a lot of ground in the next episode of Morgan Stanley Derivatives' Break the Playbook series. Full interview coming soon.
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Anthropic's new threat report reveals that a cell in northern Yemen (highly likely Houthi-linked) used Claude Code as a substitute for an entire missile engineering team. They ran multiple Claude instances simultaneously — one writing code, one researching, one reviewing — to develop guidance software for a tactical guided rocket, a 2,000+ km ballistic missile, and a hypersonic glide vehicle variant called "R2000." The specific tasks: integrating open-source autopilot onto a phone-class flight computer, writing navigation and control software, running six-degree-of-freedom trajectory simulations, and using reinforcement learning to tune flight-control algorithms. They compiled everything into a standalone offline executable so they could keep working without Claude. They actually test-fired a guided rocket in Yemen. It appears to have failed. Within hours they were back in Claude doing post-test failure analysis on the telemetry data. Anthropic's safeguards blocked many requests but the operators evaded them by hiding the end use, splitting work across many sessions, and using other workarounds. Linked accounts were banned. Anthropic says there's no evidence they fielded an operational weapon — but they already had an offline toolkit that no longer needed Claude. This is one of six conventional-weapons cases in the report (three China, two Russia, one Yemen), alongside cyber ops, influence campaigns, a Mali-linked mass surveillance platform, bio-misuse attempts, and Chinese labs illegally distilling Claude.
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Maximus retweeted
Druckenmiller on AI
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US corporate profits are now way above their long-term trend. They’re about 20% above the trend since 2000, the largest divergence on record.
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We’re in orbit! And just made European history: This is the first time a privately developed rocket reached orbit from continental Europe; and a testament to the dedication, expertise, and teamwork of everyone involved.
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Introducing “Break the Playbook”, a new video series from Morgan Stanley Derivatives. In episode 1, BlackRock’s @RickRieder joins us to discuss how he uses equity derivatives while leading one of the industry’s largest fixed income platforms.
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Maximus retweeted
Micron’s earnings were a slightly negative-sum event: Apple and the hyperscalers shed more market cap then $MU, Sk Hynix, Samsung, $SNDK, $STX, and $WDC gained today.
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Maximus retweeted
Crazy take from Claude
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