Great update Raoul, thanks. Super frustrated by these range bound markets, ready to put some risk on!

Thanks Raoul, I am with you, my only concern is the 1,5Trillion USD in the TGA and we are approaching election. If the markets start breaking can they manage to kick the can down the road one more time?

What happens if the FED says that they are going to be buying stocks? Another bounce back to new highs?

What is it about GE and T that makes them stand out from F on your BBB list? Have you taken into consideration the likelihood of govt. bailouts of certain industries over others?

There is a simplicity and elegance to this reasoning that is difficult to deny.

Great update Raoul. I understand you're looking at the BBBs from a top-down perspective, but more from a bottom-up perspective the one thing I would mention is that PE funds have a lot of dry powder and could bid for assets from some of these names to take advantage of the discrepancy between public and private valuations. KKR was even rumoured to be looking at taking Walgreens Boots wholly private a few months ago. Now large LBOs are not an easy thing to do right now, but contrary to what some people think the debt markets are not frozen at all - leverage would have to be lower but if PE firms can buy at an attractive price they can probably make the equity case work, at least in their models. They won't bid in a crash, but if indices hold up and it's just these names breaking lower, I could see that happening. Jumbo deals tend to happen in the latest stages of the cycle. I haven't looked at GE but a colleague of mine has and he thinks they still have many more assets they could sell - the sum of the parts is greater than the whole - and are unlikely to be downgraded to junk. That's a risk for shorts, likely manageable, but something to be aware of for the smaller names in that list. The largest ones (Ford, AT&T, Citigroup, etc.) are out of reach for PE so maybe safer.

Hi Raoul, I know you are on the watch closely for us monitoring all the signals. Should we be expecting new trades in the (near?) future from you in the form of shorting troubled companies like AT&T?

Thanks for the update. I think it was telling that your last point, referencing volatility. Not sure if you consider the VIX a trade, but today it broke a key inidicator, went below 0 on the %B for VIX daily. Could VIX calls be part of your short strategy? There is a storm on the horizon, and doesn't look like the VIX gap from March gets closed just yet.

This is a dumb question, but how did Raoul say to short GE and T when it's time? Not buying puts, did he say futures?

Hey Raoul, thank you for this great piece! Two questions: 1 - Could you provide stop-loss levels for those willing to short GE and AT&T now? 2 - What about EM banks such as Russia and Brazil? Best!

Thank you Raoul.

As a side issue, with respect to that Citi data and your view on banks generally - I have an Interactive Brokers account. Got quite a bit of cash on hand still, and the USD for example are parked in Citi by the brokerage. I've CAD in Canadian banks and AUD in Australian banks, through IB too. My question is, what measures have you taken regarding protecting whatever cash you have on-hand? Cheers.

Great work, Raoul. I have been following this narrative for a few months. I thought you would have had Ford included and maybe GM. You have mentioned these several times; why have you left them both out?

I don't think there is a world where AT&T is allowed to go to zero regardless of whatever the debt burden is. The bailout will come long before that happens. To me it seems like the Long Tech / Short Financials is the trade here. Even if this pans out as Raoul expects, the low debt tech sector will outperform and financials (esp. regional banks) will continue to suffer. This analysis needs to be accompanied with the importance of a company like AT&T in the US, especially in an environment where they are bailing out everything left and right. I think this goes the way the HYG trade did earlier this year. You get a step down in Oct., right before the election and they get money from the govt. for free just to keep people on the payroll and we worry about this in 2021. Fed will help print collateral for any company that is a systemic risk and backstop the bonds, which will reduce spreads, while fiscal will backstop any and everything and provide enough cash to avoid the debt holders from calling an event of default and we chug along.

I agree it's a great analysis, succinct and logical, makes sense. There's a tiny problem... markets have not been logical at all in the last few months. There's a lot of talk in the comments below about Fed saving the day again, but what about Robin Hooders? If Fed doesn't have moral right to buy stocks when they are ATH (again, perfectly logical) then Robin Hooders will if you believe this narrative and PA in Hertz... It's not a criticism of the analysis rather sharing my struggles making logical senses out of illogical markets...

Thanks Raoul, What happens to risk parity strategies when the UST 10y yield goes to zero? Referencing Mike Greens model simulations. Mike seems to think this is when "computer says no" happens (ie they break down). Would love to do a deeper dive. Timing looks interesting. Thanks.

RP: To echo a question below, TGA bal hasn't been put to work yet. Couldn't a juicing by Mnuchin delay your hypothesis to after November? That's a lot of cash they're sitting on, and what are the chances they won't use it in the secondary market before the election? I can't imagine they'd want to leave Biden with that kind of gift.

Hi Raoul, What if the same scenario as in March plays out? Sharp drop & massive rescue & more of the driect money for people to spend. Won't Trump & Powell (he's got vested interest too) do everything to keep things afloat for the elections? Also worth considering that the Fed has anticipated the insolvency & has a plan ready for this. For sure they won't intervene at ATHs & will wait for things to drop and using negative market abs virus sentiment for their advantage to step in. So that criticism of their intervention will be minimal if any. Thanks

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