Broken Moats
Family-Office Long/Short Research, Variant Perception
Small caps have the best chart of the three major US indexes, and money is flowing into the financials and biotech names the Russell 2000 is full of. The position was started on the post-FOMC flush and will be managed against the 9-day EMA, with the risk of exiting if Fed chair Warsh's press conference goes the wrong way. x.comÂ
Jefferies looks ready to crash after failing its last bounce, with the May 2008 level now resistance and the price below its 50-month and 200-week moving averages. Its chief economist is leaving to advise Treasury Secretary Bessent, and Jefferies again appears in a credit blowup: per a report @kshaughnessy2 quotes, London nonbank lender MFS faces double-pledging accusations, with Santander and Jefferies among the names involved, echoing Tricolor and First Brands. x.com x.comÂ
The highest-quality private equity and private credit managers, Apollo, Ares, Blackstone and KKR, are back on sale, mainly because of interest rates. They are not as cheap as during March's SaaS debt scare, and weaker names such as Blue Owl are still to be avoided. x.com x.comÂ
Banks and XLF look to have bottomed this past week, supporting a local bottom in US small caps. Stockspy1 noted that the Russell 2000 includes many regional banks, linking the banking-sector turn to IWM. x.comÂ
US financials could lead the market into year-end if the Fed signals at the upcoming FOMC that rates will stay higher for longer, as expected. The financial sector is breaking out on the weekly chart, and banks such as JPMorgan, Goldman Sachs, Morgan Stanley and Bank of America are quietly reclaiming trend and pushing toward new highs. x.comÂ
Regional banks are next in line as commercial real estate cracks, because they hold a massive share of CRE loans that go bad as property values crater. Private credit cracked first: Apollo, Ares, Barings, Morgan Stanley and Cliffwater capped redemptions, and Apollo's co-president said some private-market marks are wrong. Now buildings sell for up to 90% off; a Chicago office bought for $68.1M fetched $4M. As loans mature and refinancing bites, every forced sale resets prices for everyone. x.com … Show more
Diamondback Energy, Coherent, Kaspi.kz and MercadoLibre suit a market where private credit is cracking and rates stay high. Blue Owl halted redemptions at a major credit fund, Blackstone injected $400M to meet withdrawals and BlackRock limited withdrawals from a $26B vehicle. Loans made at near-zero rates face higher refinancing costs as $98 oil from the Hormuz closure limits Fed cuts, while PIK interest masks deterioration. Credit tightening has historically preceded equity market stress. x.comÂ
High-yield bonds will be among the first assets sold once private credit blowups force redemptions in mixed mandates, because liquid holdings are always the funding leg. Their resilience amid the private-credit carnage, noted by @yieldsearcher, holds only for now. x.comÂ
Blue Owl is a falling knife because private credit is the new junk paper and the credit event has not even hit yet. Replying to @infraa_, who floated nibbling on private-credit longs like Blue Owl, buying here is catching a falling knife blindfolded. x.comÂ
Royal Caribbean is positioned to decline into the credit stress and economic slowdown expected heading into 2027. It belongs to a basket of high-octane shorts, mostly non-AI names, across consumer discretionary, consumer spending, unsecured credit and private credit, to be detailed in several write-ups toward year end. x.comÂ