The Only Game In Town
EVERYONE is long the top 8 market caps. I guess its really that easy, you don’t even need a money manager, simply open up a brokerage account, allocate across the board to the top 8 market caps and sell calls every month in the SP500 about 50 handles or SPY 5 handles higher then where the month opens. If the calls come in the money just rebalance the following month and do it all over again. This has been the obvious theme, its almost a natural progression of a society driven by quantitative easing to funnel all money into a small amount of hands. This is also why the income disparity of the top 0.1% from everyone else grows, its almost self fulfilling.
So let’s say you have $100k to put to work, you buy evenly across these 8 stocks putting $12,500 toward each one. Once you do that, lets assume on that day the SP500 is trading at 4150. You then sell 10 calls in the SPY which is trading at 413.12 that are 5 handles out of the money, which would be the 418s. Right now the SPY 418 calls for May are 1.40, So if the SPY doesn’t get above 418.00 Then you will pocket the 1.40, for a gain of (1.40*100)*10 = $1400. These are cash settled and no need to worry about delivery or exercise.
The obvious reason to yield enhance via selling the SPY calls is because this is what everyone is doing, they are loading up on the top 8 market caps and hedging by selling everything else or not hedging at all. It is amazing the concentration in a few names and it makes us wonder if the global central banks aren’t working in unison with the top tech companies to support a regime like this…I mean are we that complacent to believe that the top global companies aren’t in control of the monetary spigot that feeds these pigs? That would be silly, even governments are subservient it seems and this is truly a scary thought.
So here at Magnelibra we have taken the cognitive decision to disregard any modern portfolio theory, any monetary aggregate deleveraging mechanisms and have come to the obvious yet so insane conclusion that the entire system is working in unison to concentrate wealth at such an alarming pace that the only alternative is the mere destruction of the system itself and well, the odds of that happening through natural forces is almost zero…So don’t take this as Magnelibra telling you to go sell everything and just buy the top 8 and sell SPY calls, rather know that we are pointing out what may be the most crowded trade in history and has been the obvious case since Covid.
Magnelibra will keep track of this new program right here and post the results on a daily basis for you so you too can see the truth of the system. This will also coincide well with our call that the FRB will continue to expand their balance sheet to hit $10.5T by end of next year. The government will need to get their money from somewhere and thus we await the TGFP, (The Treasury Guaranteed Funding Program) This is the next obvious step for the controllers to circumvent organic economic processes and we await the announcement.
So for now here is your favorite Equities list:
As of today’s closing prices and our fictitious $100k Account here is how it will look (we have a margin account for the options to keep the $100k static). This is for illustration purposes only and will be the baseline tracker to see how well the crowded trade is doing, so we can see if there is any real selling in the future of this very crowded trade. We also threw in the options hedge for upside profit taking and downside hedge:
We believe exercises like this are a good thing, and by keeping track of each one we can begin to see divergences should they occur. We will not sell out of any or remove or add any equities, rather we want to keep this as static as possible. We look forward to reporting this exercise each day.
So in other news and following the stellar 3Y auction yesterday, we had the quarterly 10Y auction today and it tailed just a bit, but a good overall performance and yields are virtually unchanged high auction bid wise from the prior month. The bigger news the market liked in bond land was the fall of YoY inflation CPI to 4.9%…expecting 5.0%. Ex food and energy MoM was the same at 0.4%.
Bond cash was well bid into this number and the yield curve was weaker but by the end of the day the bond market was higher and curves were well bid:
The Nasdaq certainly liked it and is now above the 13350 all important area and bulls seem to be in charge here:
A close below that 13353 would negate this move and we would suspect selling momentum would put us back into consolidation mode, but for now bulls seem to have the upper hand! So we look forward to this new exercise to confirm the crowded trade bias as well as to sniff out any insider or big fund selling that may occur in the future. WE have thought for quite sometime that the equity markets have turned into the ultimate wealth concentration and power siphon that has ever existed. WE have also surmised that governments are now subservient to their technological and surveillance masters and this has now become certainly clear, that this regime is not going anywhere…
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DISCLAIMER: For educational purposes only. This is not a solicitation to buy or sell commodity futures or options. The risk of trading securities, futures and options can be substantial and is not for everyone. Such investments may not be appropriate for the recipient. The valuation of futures and options may fluctuate, and, as a result, clients may lose more than their original investment. Nothing contained in this message may be construed as an express or an implied promise, guarantee or implication by, of, or from the author Michael Agne owner of Magnelibra Capital Advisors. Magnelibra the CTA and its Global Futures Benchmark Program may hold long and or short positions in the various futures and markets that Magnelibra covers. We will never claim that you will profit or that losses can or will be limited in any manner whatsoever. Past performance is not necessarily indicative of future results. Although care has been taken to assure the accuracy, completeness and reliability of the information contained herein, we make no warranty, express or implied, or assume any legal liability or responsibility for the accuracy, completeness, reliability or usefulness of any information, product, service or process disclosed.
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