DC Lite #472

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1. SLOOS. While lending standards tightened for C&I loans to firms of all sizes in the October Senior Loan Officer Opinion Survey, banks reported the strongest demand from large and middle-market firms since 2022.

2. Bullish options sentiment. "The number of stocks in the S&P top 100 trading with inverted call skew (a sign of extremely bullish sentiment where the OTM call trades at a higher volatility than the ATM call) has surged to a high of ~20% (vs. historical average of just 3%)."

3. Bubble watch. "There’s a lot of bubble talk out there, but in my view it’s still early days. Below I show my 1998-2000 analog with the valuation of CSCO back then overlaid on the valuation of NVDA today. Those are the then-and-now poster children of the internet and AI booms. As you can see, we are nowhere close to the kinds of ‘silly season’ valuation extremes reached in 2000."

4. Beat vs. miss. "Companies offering negative surprises have been heavily, heavily punished. Misses have traded 5% lower on average the day after reporting, which is steeper than any other Q in the history of our data."

5. Profitability-adjusted valuation. "Anyone comparing today’s valuations to the Dotcom era on a basic P/E basis is missing the point ... higher profitability demands a higher valuation premium. Using our profitability-adjusted model, today’s P/E comes out to 17.75x — less than one standard deviation above its 20-year average of 16.2x."

ICYMI