Tech Stocks Accounted For 75% Of The Market’s October Return

For some context on the unprecedented dominance of the tech sector on the overall market, here is some perspective from BofA’s Savita Subramanian on October returns, when Tech continued to lead the other ten sectors, generating +7.8% on a total return basis. This translates into a whopping 75% of the S&P 500’s return last month!

Furthermore, with virtually every lagging hedge fund rushing to buy the tech sector, chasing such activist central banks as the SNB, the sector’s 24.5% weight in the S&P 500 is now the highest since October 2000.

That said, considering tech companies reported some of the strongest 3Q earnings results, the best revision trends, and rank at the top of BofA’s quant model, is there anything to be concerned about?

According to BofA, the biggest risk is the extreme crowding and positioning by fund managers. As Subramanian expains: “we hear frequently from clients, ‘you don’t want to sell Tech until year end.’ And funds certainly reflect this sentiment: Tech is the most overweighted sector by large cap active managers, displacing Discretionary whose relative weight dropped for the sixth consecutive month.” As noted above, the recent Tech rally means the sector now represents 24% of the S&P 500 index – a post-tech bubble high – and a remarkable 30% of all active fund holdings today, the highest levels in BofA data history since 2008 (Chart 1).

What about other sectors: in addition to Tech, Utilities (+3.9%), Materials (+3.9%), and Financials (+2.9%) outperformed last month. Laggards were generally defensive: Telecom (-7.6%), Staples (-1.4%) and Health Care (-0.8%) underperformed the most, while Energy (-0.7%) was also in the red despite the rally in oil prices.

YTD, Tech maintains its dramatic lead (+37.2%), contributing just under half of the S&P 500’s 16.9% total return, followed by Materials (+20.3%) and Health Care (+19.4%). Telecom (-11.9%) and Energy (-7.2%) remain in the red.

To be sure, the impact of tech on underlying financial metrics is also staggering, as the following charts from Credit Suisse show: with tech, EBITDA margins are near all time high. Ex tech, they are roughly 3% lower and in secular decline, courtesy of high barriers to entry.

The next chart shows that while tech holds the highest share of S&P market cap, it is also the fastest growing sector.

And while the massive crowding in the tech sector is a red flag for Bank of America, for Credit Suisse this is perfectly normal, and in a report released today, its analyst Andrew Garthwaite writes that “many clients cite data indicating that just a handful of stocks (largely tech) account for almost half of returns. However, we don’t find such analysis to be particularly informative; such dynamics are far from unusual – in fact, it is often the case that a small number of stocks account for an outsized share of market gains, as shown in the chart below.”

Of course, it is also that same small number of stocks that gets hammered once the tide reverses. For now, however, with vol at all time lows, traders have yet to express any concerns that the tremendous tech rally of 2017 is in dangers of ending. Ironically, the single biggest threat to the US tech sector may be the US government itself, which is starting to realize that it is leaving just a little too many pounds of flesh on the table…

5. But it splits along two lines. This is a sticker board of attendees at #FooCamp. Most wanted to see action against tech platforms.

— Matt Stoller (@matthewstoller) November 6, 2017

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Here’s What We Know About Texas Church Shooter Devin Kelley

Update: Officials revealed Monday that Kelley had sent threatening text messages to his mother-in-law, who was a parishoner at First Baptist church.

Devin Patrick Kelley “made threatening text?s? to ?his ?mother in law who went to ?the ?church,” said Texas Department of Public Safety regional director Freeman Martin. The woman, who was not named, attends the church but was not there during the massacre Sunday, authorities said. Martin would not say whether the woman’s membership with the church motivated Kelley.

“We know that he expressed anger toward his mother-in-law.”

* * *

The deranged gunman who killed 26 churchgoers and wounded 20 more at a church in rural east Texas Sunday was an atheist who ranted on Facebook about “stupid” religious people, according to a now-deleted Facebook account that appears to be Kelley’s.

Judging by his social media presence, 26-year-old Devin Patrick Kelley was a fan of guns; the cover photo from his Facebook profile showed an assault rifle. Meanwhile, the Sun reported that the page featured an Antifascist Action banner, which sparked speculation online about his ties to left-wing groups like Antifa.

However, since the screenshot was first circulated, a number of reports in fact-checking media have debunked it as a doctored image spread by right-wing activists. No official information about Kelley’s possible affiliation with any group or political movement has been made available.

Former classmates of the shooter described him as “creepy” and “weird.” Classmate Nina Rosa Nava write on Facebook that the mass murderer used to rant on the social network about his atheist beliefs. It has also been reported that Kelley’s in-laws attended First Baptist Church, but weren’t there at the time of the shooting.

“He was always talking about how people who believe in God were stupid and trying to preach his atheism,” Nava posted on her Facebook.

One former classmate, Christopher Leo Longoria, replied: “I removed him off FB for those same reasons! He was being super nagtive (sic) all the timd (sic).”

Another Facebook friend of the killer added: “He was weird but never that damn weird, always posting his atheist sh– like Nina wrote, but damn he always posted pics of him and his baby – crazy.”

Many of Kelley’s acquaintances said they never expected he would be capable of murder on such a destructive scale.

“There were people I knew who stayed away from this guy for many reasons, which all make sense now. He just requested me on Facebook recently,” one friend said. 

Another said: “’He was the first atheist I met. He went Air Force after high school, got discharged but I don’t know why.”

As it turns out, Kelley was court-martialed in 2012 for two counts of Article 128 of the Uniform Code of Military Justice, assault on his spouse and assault on their child, according to CNN. He received a bad conduct discharge as a result, confinement for 12 months and a reduction in rank. The Air Force has not released a date of the discharge.

After his stint with the US military, Kelly reportedly taught at a summer Bible school. It is unknown if he was religious or not, as a screenshot of his Facebook groups list shows he was a member of at least four groups on atheism. Kelley worked as a security guard for a Texas waterpark this past summer, according to a resume under his name that appeared online.

Kelley was married, with CBS reporting his wife’s name as Danielle Lee Shields. Information about their shared child wasn’t immediately available. Kelley purchased the Ruger AR-556 rifle in April 2016 from an Academy Sports & Outdoors store in San Antonio, a law enforcement official told CNN.

When Kelley filled out the background check paperwork at the store, he checked the box to indicate he didn’t have disqualifying criminal history, the official said. He listed an address in Colorado Springs, Colorado when he bought the rifle, the official said.

Texas Gov. Greg Abbott on Monday said there was a connection between the “very deranged individual” and the church where the slayings took place.

“I don’t think the church was just randomly attacked,” he said. “I think there was a reason why the shooter chose this church.”

However, Abbott said Kelley was denied a Texas gun permit.

Another classmate told Fox News that Kelley had a history of mental illness, and had been on psychiatric medication for a period.

“His parents had him on high doses of ‘psych’ meds from 6th to 9th grade, the time I knew him,” said the student, who only wished to be identified as Reid. He added that Kelley’s aggressive posts about atheism caused many of his former classmates to stop talking to, or unfriend, him. Another classmate who spoke to Fox News and wished to remain anonymous described Kelley as a quiet student, though he had his share of friends.

“He recently added me on [Facebook]. I accepted hence we went to school together, and any time I saw him on my timeline he was sharing stuff about guns and being Atheist,” she said. “He was pretty negative. The last post I remember was of a rifle.”

President Donald Trump said the Sunday church shooting “isn’t a gun situation” but rather a “mental health problem.”He called the attacker a “very deranged individual” with “a lot of problems over a long period of time.”

“We could go into [gun control policy], but it’s a little bit too soon,” he said. The president cited reports about an unnamed man who confronted the shooter, saying the attack otherwise “would have been much worse.”

Kelley was wielding an assault rifle when he went on a shooting rampage in the church, with Freeman Martin, the DPS Regional Director, saying that police discovered “multiple weapons” in his car. The shooter was reportedly wearing tactical gear, including a bulletproof vest and a black mask with a skull on it, an outfit that reportedly aroused suspicion at a gas station across the street from the Church where the shooter visited before starting his rampage.  It’s unclear how he obtained the weapons because the Gun Control Act of 1968 explicitly prohibits licensed sellers from selling firearms or ammunition to persons who have “been discharged from the Armed Forces under dishonorable conditions.” But it appears he did in fact purchase them from a gun store despite these violations, as ABC pointed out. One CNN analyst said it’s likely the guns were fraudulently purchased. The local sheriff confirmed that Kelley shot and killed himself.

Kelley lived in nearby New Braunfels, Texas, where he had also gone to high school. Kelley fled First Baptist Church in Sutherland Springs after being shot by a neighbor. In a panic, he called his father to say goodbye.

During a Monday morning press conference, a police spokesperson said investigators had discovered there was a “domestic situation” unfolding within Kelley’s family, but declined to elaborate. Police added that the deceased ranged in age from 18 months to 77 years, and that between 12 and 14 children were among the dead. Meanwhile, 10 people remain in critical condition. While they’re investigating, the shooter’s exact motive remains unclear, police said.

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WTI Spikes Over $57 For The First Time Since July 2015

Having legged higher at the opens of Asia, Europe, and US markets, WTI is extending gains overnight on middle-east tensions…

Brent is trading above $62 amid anti-corruption drive led by Saudi Crown Prince Mohammed bin Salman, which may consolidate his control in OPEC’s largest oil producer, and WTI has pushed above $57 as producers such as Nigeria, Saudi Arabia signal they support a potential extension of OPEC output cuts.

“We have political uncertainty, risk of political instability in this major oil producing country and also unforeseen implications for the entire region,” Commerzbank analyst Carsten Fritsch says by phone.


“It justifies a certain risk premium in the oil price…


At the moment you’d have to be brave to bet against Brent.”

And everyone and their pet rabbit is record long the energy complex.

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Twitter Revises Terms Of Service, No Longer Believes In “Speaking Truth To Power”

Having been caught in a crossfire over internet free speech and Russian conspiracy theories, Twitter has quietly made a significant change in its stated “Twitter Rules” terms of service.

Following several Congressional hearings meant to root out “Russian interference” by Twitter accounts, as well as an incident in which a disgruntled, now former employee, disabled Donald Trump’s twitter account for 11 minutes, it appears that Twitter no longer believes in “speaking truth to power.”

The change can be seen in Twitter’s TOS, in the “Abusive Behavior” section, which currently states that “We believe in freedom of expression and open dialogue, but that means little as an underlying philosophy if voices are silenced because people are afraid to speak up.”

This is a material change from what this section stated as recently as November 2, when the section read “We believe in freedom of expression and in speaking truth to power”…

… with believing in “speaking truth to power” replaced with “open dialogue.

The change took place just two days after November 1, when Twitter, along with Google and Facebook, were questioned by Congress in the ongoing witch-hunt, as dubbed by Donald Trump, for “Russian influence” that may have led to interference in the 2016 presidential election. As @Jack twitted at the time, the changes to Twitter’s rules were made as part of a November 3 attempt to “clarify” them.

We just published a clearer version of the Twitter Rules to clarify our policies and how we enforce them

— jack (@jack) November 3, 2017

In a statement, the company said that it wanted to make it clear that “context is crucial when evaluating abusive behavior and determining appropriate enforcement actions.”

In its testimony to the Senate Intelligence Committee, Twitter unveiled that it used a vast array of tenuous criteria to define accounts as “Russia-linked,” and also admitted it had censored the hashtags #PodestaEmails and #DNCLeaks tweets during the 2016 US presidential election campaign in an effort to limit public exposure to leaked documents describing the Democratic National Committee’s efforts to boost Clinton as the Democratic Party’s  preferred candidate during the primaries, a process which was subsequently defined as rigged by none other than Elizabeth Warren following blockbuster claims by interim DNC chair Donna Brazile. Twitter Associate General Counsel Sean Edgett claimed many of those tweets were “automated” and hidden by anti-spam systems. He also admitted that less than 4 percent of them came from potential “Russian-linked” accounts.

Last week Twitter also announced it was banning all ads from RT and Sputnik, citing the same allegations of meddling in the 2016 US election. That, despite the company previously trying to engage RT in a special US election advertising package, which RT said it had declined.

Later on the same day Twitter revised its TOS language, Twitter announced that while it may no longer speak “truth to power”, the reason why power was not allowed to speak for 11 minutes, i.e. when Donald Trump’s account was deactivated for 11 minutes, was due to a departing employee’s decision that it was in Twitter’s best interest to shut up the US president.

Earlier today @realdonaldtrump’s account was inadvertently deactivated due to human error by a Twitter employee. The account was down for 11 minutes, and has since been restored. We are continuing to investigate and are taking steps to prevent this from happening again.

— Twitter Government (@TwitterGov) November 3, 2017

Through our investigation we have learned that this was done by a Twitter customer support employee who did this on the employee’s last day. We are conducting a full internal review.

— Twitter Government (@TwitterGov) November 3, 2017

A separate update will be issued on November 14 with more details on how the company reviews and enforces policies, according to Twitter.

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Trump Drafting Executive Order To Kill Obamacare’s Individual Mandate, Report

After having previously cut so-called “cost reduction subsidies” (see: Trump To Scrap Crucial Obamacare Insurer Subsidy) and the marketing budget for Obamacare, Trump is now reportedly ready to also repeal the legislation’s controversial “individual ma…

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Second Saudi Prince Confirmed Killed During Crackdown

Following the death of Prince Mansour bin-Muqrin in a helicopter crash near the Yemen border yesterday, the Saudi Royal Court has confirmed the death of Prince Abdul Aziz bin Fahd – killed during a firefight as authorities attempted to arrest him.

The death has been confirmed by the Saudi royal court.

The Duran and Al-Masdar News both report that the prince died when his security contingent got into a firefight with regime gunmen attempting to make an arrest.

Prince Aziz (44) who was the youngest son of King Fahad.

The Duran’s Adam Garrie points out that Prince Abdul Aziz was deeply involved in Saudi Oger Ltd, a company which until it ceased operations in the summer of this year, was owned by the Hariri family. Former Lebanese Prime Minister Saad Hariri was punitively in charge of the company until it ceased operations.

Prince Abdul Aziz’s strange and sudden death which is said to have occurred during an attempted arrest, sheds light on the theory that the clearly forced resignation of former Lebanese Prime Minister Saad Hariri had more to do with internal Saudi affairs than the Saudi attempt to bring instability to Lebanon.

The Saudi Royal family has now lost two princes in 24 hours.

As Al Jazeera notes, in this Saudi version of ‘Game of Thrones’, the 32-year-old Bin Salman shows that he is willing to throw the entire region into jeopardy to wear the royal gown.

His actions have already all but destroyed the Gulf Cooperation Council (GCC); Yemen can no longer be referred to as a functioning state; Egypt is a ticking time bomb; and now Lebanon may erupt.

There’s a lot to worry about.

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Lira Spikes After US Resumes Turkish Visa Processing

Having plunged several weeks ago following the latest diplomatic spat between Turkey and the US, in which the two countries’ consulates announced they had halted bilateral visa processing services, the Turkish Lira spiked moments ago on a Reuters report whiuch suggests diplomacy may be slowly returning to US-Turkish relations:


As Bloomberg adds, “the U.S. mission in Turkey will issue statement later on Monday about updates to its visa ban, according to two U.S. officials who asked not to be named because the policy hasn’t yet been made public. Officials confirm earlier report by Reuters that U.S. is partially lifting its ban on issuing visas in Turkey, without elaborating.”

“Given that the diplomatic spat between Turkey and the U.S. contributed to the lira’s selloff, any signals that would indicate that relationship may gradually normalise will provide the lira with respite,” Piotr Matys, a currency strategist at Rabobank in London, told Bloomberg, and sure enough, the TRY jumped sharply in kneejerk response to the headline.

Still, as some FX desks point out, “TRY will need something a lot more substantial than this headline to recover fully. Relations remain extremely strained and there is still scope for this situation to worsen again.”

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