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A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web

Business Insider detailed one of my current biggest market worries only, true to form, they used a lot more hyperbole than I would,

“A sharp downward shift in sentiment can quickly derail a momentum strategy and send the market tumbling. That happens as many of the traders jammed into the same trade attempt to sell out of their positions simultaneously. We’re currently at risk of such a reversal, says Morgan Stanley … ‘When the market starts to rotate more defensively that there is a risk of pain at the portfolio level as the drivers of long and short momentum over the last two years will likely unwind quickly,’ Mike Wilson, the chief US equity strategist at Morgan Stanley, wrote in a client note.”

“A crowded stock trade is at risk of unraveling — and its collapse could cause a brutal reckoning for the market” – Business Insider

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Inevitably, Canadian rail corridors are now crowded by oil cars as bloated crude inventories look for new homes. Crude by rail has returned to 2014 levels despite lower commodity prices and the trend will intensify if Cenovus Energy Inc. can get hold of some rail locomotives,

“@T_Mason_H Crude-by-rail from Canada is back - up to 178,000 b/d in December 2017, nearly matching the previous record high volume “ – (chart) Twitter

“Canada’s Crude-by-Rail Terminals Sit Idle as Oil Glut Grows” – Bloomberg

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There are a lot of people rooting for Elon Musk and his dreams of an alternative energy future but portfolio managers have a diametrically opposed view. Musk’s auto company, Tesla Inc., is now the most shorted stock in the U.S. benchmark, primarily because of debt and cash flow issues,

“Short sellers have not covered [Tesla bond short positions], and there is still a par value of $251m short in the 5.3% 2025 issue, equating to 13.2% of the total issue size. That represents the vast majority of $261m total short demand across the four TSLA bonds with short balances. The limiting factor for short sellers has been the available supply of bonds, with the utilisation of lendable supply currently at 99% ─ having not been less than 90% since October … Over in the equity, Tesla is the most shorted stock in the US market, on a dollar basis, with $9.4bn of stock borrowed.”

For Tesla shareholders, it should be disconcerting that the only reason there isn’t more short positions on the company’s debt is that there’s no borrow available to do so.

“Tesla the most shorted stock on the US market, again” – FT Alphaville

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Morgan Stanley strategist Andrew Sheets believes that U.S. equity markets will be boosted by first quarter earnings reports, but the latter half of the year is likely to be difficult,

“The S&P 500 will be stuck [in a 2650 to 2800 trading range] until the next positive catalyst could arrive—1Q corporate earnings … The reality is that many of the things we expected this year are happening—higher volatility across rates, FX and equity markets, tighter financial conditions, risk adjusted underperformance of credit relative to equities, contracting equity valuations in the US, narrower breadth, and a peak in economic leading indicators and data surprises. We have yet to see some of the more inauspicious things we expect later this year—including a peak in operating margins and y/y EPS growth in the US and perhaps other regions as well. However, we can already see the writing on the wall.”

“@SBarlow_ROB MS’s Sheets “ – (research excerpt) Twitter

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Tweet of the Day:


Diversion: “This Disney/Pixar Bracket Is Tearing the Internet Apart, So Tear It Some More and Show Us Yours” – i09

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