One catalyst being given credit to the generally positive performance equities today were bullish comments in a CNBC interview with Appaloosa Management’s David Tepper. Tepper stated that in his view “rates have temporarily made the most of the move” and ” “it’s very difficult to be bearish.” Tepper also stated a belief in the possibility of Japan stepping in as a buyer for US Treasuries following the recent rise in yields.  As for why exactly Japan doing so would benefit Treasuries, it should be noted that Japan is the largest foreign holder of US Treasuries (per Treasury International Capital TIC data).  As of December data (January data is set to be released next Monday, 3/15), Japan held $1.25 trillion in Treasury securities.  The only other country that comes even close is China with $1.072 trillion in Treasury holdings.  Behind those two, the UK is the next largest holder with not even half that amount: $440.6 billion.

Using the same TIC data, from early 2015 through the end of 2019, Japan was a net seller of US Treasury and Federal Financing Bank securities.  For most of 2020, that had changed with Japan becoming a net buyer though that waned towards the end of the year. The recent uptick in yields coincided with Japan returning to being a net seller.

While Japan has purchased fewer Treasuries, they have still been making up the difference as big buyers of MBS. According to the TIC data for December, positive flows of MBS purchases offset the decline in Treasury purchases. As for Japanese data with less of a delay, in the chart below we show weekly net purchases of all foreign bonds and notes in US dollar terms summed by month. As for this more high-frequency data, again, there has yet to be evidence that Japan is buying Treasuries. For the month of February, the country was a net seller of $19.6 billion in foreign bonds and notes.  But Click here to view Bespoke’s premium membership options for our best research available.

Over the past few weeks, high growth names have turned into a pain trade with the Vanguard Growth ETF (VUG) having fallen 11% from its February 12th closing high to the intraday lows last Friday; with a small rally in the second half of Friday’s session which has continued today, the ETF is now down 7.16% since the 2/12 high.  Meanwhile, in the same time frame, the iShares Select Dividend ETF (DVY) has risen 8.13% since its February 12th close, breaking out to new all-time highs both on Friday and again today

Looking at the screen of various styles of ETFs in our Trend Analyzer, the recent moves have brought VUG deep into oversold territory as of Friday’s close. Other growth-focused ETFs are similarly oversold. Meanwhile, the strong performance of dividend stocks has resulted in DVY alongside the S&P Dividend ETF (SDY) to be extremely overbought at more than two standard deviations above their respective 50-DMAs.

In the chart below, we show the ratio of the Dividend ETF (DVY) versus the Growth ETF (VUG). Times in which the line is declining indicate outperformance of growth while an upward trending line indicates outperformance of dividend stocks.

As could be expected given the different risk premiums of the two styles of these ETFs, growth stocks have seen fairly consistent outperformance in recent years. But more recently, the opposite has been the case, and in a big way.  As shown in the second chart below, over the past month (21 trading days) the ratio of DVY to VUG has risen over 16%. In the history of the data going back to early 2004, the only period that has seen this line rise at a more rapid pace was in September 2008 when it rose by 25.46%. Looking at that instance, the outperformance of dividend stocks did not lead to any sort of a longer-term trend though. In fact, the ratio peaked only a couple of months later erasing the entirety of the move by early March 2009.  Click here to view Bespoke’s premium membership options for our best research available.

Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.

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Mania

Leading Card Grader PSA Doubles Prices as Industry Booms by Darren Rovell (Action Network)

Two weeks after being sold for a bit less than $1bn, the leading grader of sports trading card quality, has doubled prices and raised minimum batch counts amidst an epic order backlog numbering millions of cards. [Link]

How a 10-second video clip sold for $6.6 million by Elizabeth Howcroft and Ritvik Carvalho (Reuters)

A non-fungible token purchased for $67,000 is telling for 100x that price less than six months after being sold for the first time last fall. [Link; auto-playing video]

First Trust Takes Aim At ARK; Launching Innovation ETF by David Dierking (The Street)

Following in the footsteps of ARK Invest’s extremely successful Innovation ETF (ARKK), ETF giant First Trust has filed for an ETF that takes a similar approach. [Link; auto-playing video]

Meme Stocks

Hertz, the Original Meme Stock, Is Turning Out to Be Worthless by Steven Church (Bloomberg)

The original retail-fueled short squeeze from 2020 saw Hertz declare Chapter 11; that process is now finishing up with equity owners getting nothing. [Link; soft paywall]

Bots hyped up GameStop on major social media platforms, analysis finds by Michelle Price (Business Insider/Reuters)

A Massachusetts-based cyber security company has identified a large number of social media bot accounts helped amplify the craze for GameStop (GME) stock. [Link]

Washington

The Evolution of the Oval Office Décor (American Home Shield)

Ever wonder what the President’s office looked like in the past? Décor changed little in the first half of the 20^th century, but since Truman each President has redecorated to suit their personal styles and the fashions of the time. [Link]

Divided Senate Passes Biden’s Pandemic Aid Plan by Emily Cochrane (NYT)

Despite some confusion over specific unemployment provisions that delayed passage Friday, this weekend the Democratic-controlled Senate passed a $1.9trn aid bill that will result in thousands of dollars of aide for the middle class, expanded jobless claims benefits, and is estimated to cut poverty by an astounding one-third this year. [Link; soft paywall]

Whoops

Hey Citi, your bitcoin report is embarrassingly bad by Jemima Kelly (FT)

This week an effort to discuss crypto currency with clients led to some pretty spectacular whiffs from Citi’s research group, including a remarkable mix-up over basis points versus percentage points. [Link; paywall]

The Reemergent 1977 H1N1 Strain and the Gain-of-Function Debate by Michelle Rozo and Gigi Kwik Gronvall (NIH)

During the 1970s, a virulent flu strain that wrecked havoc likely represented a failure of containment at a bio research lab. The genetics of the virus were almost identical to strains first collected decades prior. [Link]

Shifting Gears

‘I’ve Never Seen Anything Like This’: Chaos Strikes Global Shipping by Peter S. Goodman, Alexandra Stevenson, Niraj Chokshi and Michael Corkery (NYT)

Shipping can be a volatile business, but the rapid swings in demand across goods and geographies have created unprecedented chaos across transportation markets around the world. [Link; soft paywall]

How Remote Work Is Reshaping America’s Urban Geography by Richard Florida and Adam Ozimek (WSJ)

Roughly half of Americans are working remotely, and while that share will decline as vaccine rollouts make normal offices safe again, some of the shift will persist amidst a longer-term trend towards the practice of working without going in to a physical desk. [Link; paywall]

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Have a great weekend!