FB worth more than JPM+BAC+WFC+GS
May 21, 2020
–For the past month ESM has been in a clearly defined range of 2755 to 2965. Yesterday the high was 2975, indicating the possibility of an upside breakout. However, a few Trump tweets targeting China were enough to push the market back into lockdown range this morning (now 2950). Buyers of yesterday’s 20-yr auction were aided and abetted by Trump’s evening escalation. Nice buys! …in front of the scheduled Fed purchases today of longer dated issues ($3b 7s to 20s and $2b 20s to 30s). The auction yield was 1.22, with a yield late yesterday of 1.18 and this morning at 1.155 (I’ve instructed the desk to unload our auction buys just before Lorie Logan steps in).
–Fed minutes unsurprisingly discussed more specific forward guidance. Yesterday EDM0 ended at 99.71, the highest settle for the front quarterly of the move. Futures are indicating a further drop in libor; previous sales of EDM0 9962.5 straddles from 10 to 8.5 are seeing the calls paritize…now 8.5 in the money. Overall volume continues to be light, with little official news scheduled until after the holiday. TYN 139 straddle settled just above 4% vol at 1’30. If we’re at the same futures level (TYU 138-25) the straddle would be 1’22 on Tuesday at the same vol.
–FB hit a new all-time high with market cap $655B. Chart below is from Holger Zschaepitz (taken from twitter) showing that total market cap of this Magnificent 7, AAPL, AMZN, FB, GOOGL, MSFT, NFLX, NVDA has soared to a new high over $6 trillion. That’s in comparison to an economy producing $21.5 T, no make that $19.3 T. No make that $17 T… well, who knows what this year’s GDP will be, but certainly lower. By contrast, top 7 financials, JPM, BAC, WFC, C, GS, MS, USB total $851.7 billion. In other words, FB is getting close to entire banking industry. Makes me a little queasy.
–DISCLAIMER for the COMPLIANCE dept. The “instructing the desk” line is intended to be sarcasm. A joke. Lorie Logan runs the NY Fed desk and is a close personal friend of mine. I don’t think GDP is going to be as low as $17 trillion this year. That too, was a joke. I think.
