Dear $AMC Shareholders, Credit Markets are trying to tell you something, will you listen?
New Post - AMC 5.75% due 2025 are offered at 81 cents on the dollar. Meanwhile, the stock is trading at all-time highs. The disconnect indeed is very telling...
*After 30 years of trading stocks and bonds, 95% of the time I can assure you, credit leads equities. That´s a 12.25% yield to worst vs. 5 year Treasuries at 0.79%.
Thing of beauty from @tradingview - a moral hazard overdose on stage, brought to you by the #FOMC
AMC equity trading at $54
AMC June 4th, 2021 (tomorrow expiration) $145 Strike Call is trading at $2, comedy.
-40% off sale AMC equity, 67,000 contracts have traded in the $145 strike calls expiring tomorrow, now trading at $0.50 vs. a $46 stock price. Just wow. Moral hazard -comes with a price.
AMC
Equity: $26.3B ($5.2B in May)*
Debt: $11.1B
Enterprise Value: $37B
Nomura is a small prime broker, CS is a big one, MS / GS as well, CS must have the biggest hit relative to Nomura at $2B - we have to assume $8B to $12B hit across them all?
CDS was telling us something Friday.. Credit leads equities..
1. No one knows how big he was or how levered. 2. Have to assume goldman went first and protected itself. MS not far behind.— but with bigger exposure could have a loss. Those that acted slower (nomura, cs) probably left holding the bag???
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- relative value rates, sell-off in 5s vs rest of the curve, US treasuries.
*in both cases too much capital was hiding out in crowded venues.
When central banks do NOT allow the business cycle to function over longer and longer periods of time - the good news is wealth creation becomes colossal. Bad news is Capital moves into crowded venues, poised for disruption.
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In rates, as the bond market sold-off. Originally, the long end 30s was deemed at risk, capital moved into 10s, 7s, a “safe” place. As selling pressure moved into the middle part of the curve, trillions moved into the front-end looking for duration risk shelter.
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Froth Impact: Market Trigger’s the Policy Response
SEC: “We are aware of and actively monitoring the on-going market volatility in the options and equities markets and, consistent with our mission to protect investors and maintain fair, orderly, and efficient markets.”
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One of the problems with sell side banks is a classic silo-ization. Splintered fiefdoms litter the field often times with little top down coordination between the views of equity analysts, economists, high yield bond traders, fixed income strategists, rates trading etc.
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Each group is a power center with their own p/l, their own Senior MD leadership - with the highly profitable silos carrying the most weight, influence over high level decision making across the firm. In periods of significant market dislocations
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