Need to Know: Why the stock market’s ‘sojourn into depravity’ is about to crush short-sellers

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The second half of the year starts today, and look out above!

The Fly, the anonymous wordsmith who left Wall Street decades ago and now runs the iBankCoin blog, says we’re about to witness the “total decapitation of the shorts” thanks to the announced pause in the U.S./China trade war.

At this point, he’s not wrong. One glance at the bubbly premarket action (see “the market” below) will tell you that. “You’d be dumb to bet against this sojourn into depravity,” he wrote. “How can you short stocks when all there is is upside surprises?”

By shorting, investors borrow shares of a stock or asset they think will fall in value, but sell them immediately at today’s price. If all goes to plan, that stock then drops and then they have the option to buy them at a the cheaper price, and profit from the difference. But that bet can backfire if the asset goes the other way.

His advice: Load up on tech, biotech and new IPOs.

Either way, getting caught on the short side when this rally takes off could get nasty, especially as the wounds of June’s huge performance are still raw.

However, while the bulls have the upper hand, Morgan Stanley’s Chetan Ahya is convinced there isn’t much meat to the recent developments.

There is “no immediate escalation, but still no clear path towards a comprehensive deal,” he said in our call of the day. “We lack clarity on whether real progress was achieved on the sticking points that caused talks to break down in the first place.”

Not just that, in a note on Sunday he said trade tensions are becoming more of a problem for business confidence and predicted global growth will slow to a six-year low of 2.9% by the end of the year, from a recent peak of 4% in the second quarter of 2018.

Ahya wasn’t the only one questioning Monday’s rise in shares:

For now, the uncertainty that’s dogged — and ultimately fueled — this market does, indeed, appear to have lifted. We’ll see how long that lasts.

The market

Futures on the Dow YM00, +0.94%  , S&P ES00, +1.06% and Nasdaq NQ00, +1.69% are busting out ahead of the bell thanks to the latest on the trade front. Gold GCQ19, -1.34% is feeling a stiff risk-off breeze and heading lower. The U.S. dollar DXY, +0.26% and oil US:CLN19 US:CLN19 are both up. Europe stocks SXXP, +0.82% also enjoyed a big lift. Same with Asian markets ADOW, +0.63% . Bitcoin BTCUSD, -3.80% is looking at another sizeable drop.

The buzz

Facebook FB, +1.85% announced plans to make ads for jobs, and financial services searchable and available to all, in an effort to eliminate discrimination.

Two-time NBA champion Kevin Durant, who will be sidelined next year due to his ruptured Achilles tendon, is taking his talents to New Jersey to unite with Kyrie Irving.

The chart

The U.S. national debt reached a new milestone of $22 trillion this year. So, which countries around the world currently hold all that debt? Cost-estimating website breaks it all down with this colorful illustration:

The economy

All eyes will be on the June jobs report, but we won’t get a look at that until the end of the week. Car sales will also be released later this week. As for Monday, the ISM manufacturing index hits at 10:00 a.m. Eastern along with construction spending for May. Nothing Thursday, of course, in observance of the 4th of July holiday.

The stat

80% — That’s how much of the stock market is in the hands of automated buyers and sellers, such as quant funds and ETFs, according to J.P. Morgan estimates cited by CNBC. This means that the market is more sensitive to headlines and the kinds of sharp swings we’ve seen in recent history.

The tweet
Random reads

Canadian cartoonist loses job over his depiction of Trump “playing through” next to the father and daughter who died crossing the Rio Grande.

Nashville is transforming itself into a global city.

This BuzzFeed reporter is getting shredded for whining about her travels.

Major League Baseball in the U.K. was a big hit.

U.S. women’s soccer team accused of spying on British rivals

Saudi Crown Prince MBS is BACK on the world stage, apparently putting all those pesky allegations firmly behind him.

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