Bears Are Going Extinct in Stock Market's $13 Trillion Rebound; The Times that Try Stock-Pickers' Souls; 'The Big Short 2.0': How Hedge Funds Profited Off the Pain of Malls; No, New York City is not 'dead forever'

1) I saw two interesting charts in this Bloomberg article: Bears Are Going Extinct in Stock Market's $13 Trillion Rebound. Excerpt:

Skeptics are a dying breed in American equities. It's another illustration of how risky it has become to doubt the resilience of the market's $13 trillion surge since late March.

Going by the short positions of hedge funds, resistance to rising prices is the lowest in 16 years. Bears pulled out as buying surged among professional investors who were forced back into stocks despite a recession, stagnating profits and the prospect of a messy presidential election.

While perhaps logical given open-ended Federal Reserve support, rampant covering depletes at least one source of support for shares -- buying by speculators who sold them short. Virtually every constituency in the market has gotten more bullish as the S&P 500 surged 52% in five months. In the past 21 sessions, there hasn't been a drop of 1%, the longest stretch since January.

2) Along the same lines, here are three interesting charts from this blog post, The Times that Try Stock-Pickers' Souls, by Albert Bridge Capital.

The first two show that value stocks, relative to growth stocks, are the cheapest they have ever been. The third shows the similarities between 1998-99 and 2019-20. Excerpt:

There are periods where these growthy, good and glamorous names do tremendously, well. During these episodes, it downright sucks to be a fundamentally-driven value investor.

Equity markets had one of those periods in 1998-1999, and – in our view – they may be having another one of them now.

Paraphrasing Thomas Paine, these are the times that try stock-pickers' souls...

People shouted about the "new era" in 1972 and again in 1999; and they are shouting about a new era in 2020.

There is no new era. Stocks are still worth the present value of their future cash flows.

While narratives can dominate in the short term, and while the short term is sometimes longer than we like, the fundamentals eventually matter.

For what it's worth, while I think things are getting frothy, we're nowhere near a blow-off top.

Despite the last chart, today's market reminds me more of the beginning of 1999, not March 10, 2000, the day the Nasdaq peaked (the tech-heavy index more than doubled over that period).

3) This "Big Short 2.0" is only a tiny fraction of the size of the original – both in terms of the distress caused and the profits made from it – but, like the last one, I know many of the players.

Kudos to them – especially Jason Mudrick – for doing the boots-on-the-ground work, finding the right way to manifest the thesis (credit-default swaps on the BBB- tranche of the CMBX 6 index), and having the patience to wait for the trade to work.

That's the most frustrating thing about trades like this: you can be exactly right, but if you get the timing wrong, it can be very painful – often for years! 'The Big Short 2.0': How Hedge Funds Profited Off the Pain of Malls. Excerpt:

Brick-and-mortar retail has been in distress for years. Trapped between the growth of online shopping and the popularity of discount chains, many retailers have struggled to find a foothold in the changing firmament. The nation's roughly 1,000 shopping malls (excluding strip and outlet malls) have borne the brunt of the problems, with hundreds of them fighting low occupancy and the loss of major stores, known as anchors.

The coronavirus pandemic, which prompted stay-at-home orders, increased the financial strain on malls by choking off much-needed foot traffic and cash flow.

"The pandemic sped up the rate of demise for CMBX 6 malls by being the final straw for a lot of struggling retailers and mall owners," Ms. McKee said, referring to the obscure real estate index that she bet against because of its exposure to troubled malls...

Before making their bets, some investors who shorted the CMBX indexes engaged in labor-intensive research. Mr. Mudrick and his analysts walked all 39 malls in the CMBX 6 index, from the Northridge Fashion Center in Los Angeles to the Town Center at Cobb in Kennesaw, Ga. Wearing casual clothes, his group paced the perimeters and food courts, snapping photographs and taking notes.

4) A lot of folks (myself included) took issue with James Altucher's provocative essay, "NYC IS DEAD FOREVER. HERE'S WHY." Here's comedian Jerry Seinfeld in today's New York Times: So You Think New York Is 'Dead'. Excerpt:

Manhattan is an island off the coast of America. Are we part of the United States? Kind of. And this is one of the toughest times we've had in quite a while.

But one thing I know for sure: The last thing we need in the thick of so many challenges is some putz on LinkedIn wailing and whimpering, "Everyone's gone! I want 2019 back!"

Oh, shut up. Imagine being in a real war with this guy by your side?

Listening to him go, "I used to play chess all day. I could meet people. I could start any type of business." Wipe your tears, wipe your butt and pull it together.

He says he knows people who have left New York for Maine, Vermont, Tennessee, Indiana. I have been to all of these places many, many, many times over many decades. And with all due respect and affection, Are... You... Kidding... Me?!

He says Everyone's gone for good. How the hell do you know that? You moved to Miami. Yes, I also have a place out on Long Island. But I will never abandon New York City. Ever...

Real, live, inspiring human energy exists when we coagulate together in crazy places like New York City. Feeling sorry for yourself because you can't go to the theater for a while is not the essential element of character that made New York the brilliant diamond of activity it will one day be again.

And here's lawyer Stephen Diamond in the New York Post: No, New York City is not 'dead forever' – here's why. Excerpt:

The city has always had to invent new reasons for people to come and stay. As a result, New Yorkers exist in a state of accelerated evolution. Faced with the loss of an industry, business or job, we dust ourselves off and either fix it or make a new one. We never, ever, accept defeat...

It's time for real New Yorkers to earn their inheritance and reimagine our city.

I live in Times Square, where the lights will burn bright again on Broadway if I have to turn them on myself.

So stand up, New York and join me. Or go to Florida.

Best regards,

Whitney