PAULOMACRO — JUN 23, 2026 — PAID
EQUITY FUNDING
The active S&P AIR TRF future that approximates equity funding has rolled to September, and it shows tightness pretty far out — tighter than year-end 2023 or 2025. July shows the tightness has persisted and is not going away. Too much demand for leverage met too much supply of paper; equity funding spiking is the result.
This is NOT a balance-sheet issue — the swap spreads that support the fixed-income basis-trade funding are well behaved — and the "plumbing" is fine (no repeat of the 2019 Repo-calypse). This is the danger for any equity bubble: liquidity seems fine, but skyrocketing funding always ends the party. Leverage behavior in equities has become extreme.
KOREA
Korea is ground zero for the most degenerate, narrow behavior, driven by the semis SK Hynix and Samsung. I've flagged failing momentum / divergence in MSCI Korea / the Kospi.
The confounding part is the collapse in the Korean won (KRW) as the market skyrockets — the KRW should be ripping but is falling a lot. Part of the answer: the EWY ETF (MSCI Korea) reflects foreign ownership, and there were significant outflows from EWY in May even as Korean equities rallied — and May was the most significant KRW decline so far. So the domestic bid and the foreign exit are pulling in opposite directions.
Add increasingly negative AI headlines: weak ROI from adopting firms (starting with Uber's announcement), the "Great Circularity," and the mismatch where S&P earnings expectations are boosted by hyperscaler spend that lifts semiconductor earnings immediately but which the hyperscalers depreciate over time.
Two overnight developments: (1) Chosun reported SK Hynix is slowing its HBM4 production ramp to focus on general-purpose DRAM, which now offers higher operating-profit margins than HBM despite lower per-gigabit pricing — delaying conversion of some HBM3E lines originally scheduled to transition to HBM4. (2) Korea's market watchdog expressed regret over being too hasty in approving leveraged funds.
I always assumed energy would be the stake through the heart of the semiconductor bubble and flying developed Asia; sometimes narratives just buckle under their own weight.
MAG7 / CREDIT
As stress boomerangs back onto the Mag7 (and the top-heavy indices that own them), Mags vs SPX are starting to feel very heavy. Despite the Risk-Off tone, hyperscaler bonds and spreads are actually rallying along with Treasuries — but CDS is leaking higher. Private credit continues its slow bleed; Apollo (APO) dropped another one ("redemptions will continue until morale improves").
YEN
Press that Treasury Secretary Bessent and Finance Minister Katayama held an urgent online meeting on the yen's depreciation. After burning $70bln+ in reserves on the last USD/JPY intervention, they may try again.
Positioning is crazy: speculators went from max short yen in 2024 (followed by "Yen-maggeddon" that summer), to historic max long in 2025 (Liberation Day risk-off), back to nearly max short today. If Bessent and the BoJ team up to shake the tree in the yen, it would be a grenade into equities, credit and fixed income — especially with FX vol compressed to rarely-seen levels. AUD/JPY is feeling Risk-Off / unwindy. And if the yen rallies, oil could look cheaper to the Japanese.
OIL
Extreme positioning in Brent managed money, which shorted aggressively on the decline — outstanding short contracts second only to mid-December when Brent was at $60 (in notional terms, even more striking). The market collapse has wiped managed-money positioning (WTI + Brent) from $64bln net long down to $17bln.
Bulls (like me) lacked the imagination that (1) China would wait out the market to the tune of 4-5mmbpd and run down stocks, balancing the physical market, and (2) speculative positioning would flip from the 92nd-percentile long at the March 31 highs to the 19th percentile last week. China is waving in tens of millions of sanctioned Iranian barrels.
On the "North Star": I always stated that regardless of Trump, Iran would constrain Hormuz flows; Iran is now becoming the new OPEC and the world's largest oil producer — traffic will never normalize if it is controlled by Iran.
The ~35mmbbls+ of tankers currently leaving is a jailbreak of stranded plus Iranian barrels — moving from Floating Storage to Oil-in-Transit (left pocket to right pocket), already in the balance and a prerequisite to draining onshore storage. The only real question is whether ballast tankers are coming into the Persian Gulf, which would enable fresh production (restarts); Benni Kim and I are "not seeing much unsanctioned ballasting in… very quiet." I think of what's happening now as another SPR release into the prompt market — one China is grateful for. The majority coming out of the Gulf is on sanctioned vessels carrying Iranian crude — a step in the progression, but not significant restarts, and it's almost July. Shut-in production has eased to ~-8mm from -12mmbpd (primarily Saudi/Kuwaiti bumps for summer power burn). The world is still drawing -5mmbpd. (Cites Goldman from last week.)