Nomura’s McElligott Delivers Unified Theory Of Pretty Much Everything, Calls For ‘Violent Short Squeeze’ In Stocks
Last week, Nomura's Charlie McElligott found himself at the center of a debate around what "caused" the harrowing lunchtime drop in U.S. equities that played out on Tuesday and effectively dashed the hopes that the G20 trade truce rally would prove sustainable.
For McElligott, the culprit was CTAs - or at least they contributed, according to his models. As a reminder, here's what that episode looked like:
(Bloomberg)
"Our CTA Trend model is again deleveraging massive notional in ‘long US
I have a question. Does this mean Mom and Pop are getting in at the bottom?
I am guessing mom and pop are frightened and either selling or sitting on there hands.
The smart money is weighing the econ outcomes and running their models, doing research to gauge future cash flows for the businesses and assuming they don’t have too much career risk by being early (or wrong) they are taking advantage of any opportunities they see (most MFs can’t increase cash levels too much so they sell less attractive A to buy more attractive B). Pension funds probably adding exposure while selling some bonds if their allocation allows it (ie they were smart enough to de-risk at the highs).
Be smart Dana, do your homework and buy things that are undervalued or great fairly valued assets and always watch risk, concentrations and leverage (corp and personal)