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Market-Neutral Wipe Out, Likely Next On The Bail Out Bandwagon As Liquidity Disappears Again
The Highbridge HSKAX index just suffered its biggest drop since March 2009. Market Neutral players are getting carted out feet first as liquidity is now totally gone and 100k SPY blocks move the market. Nobody but the upward biased and risk-free primary dealers want to participate in this market. MNs are deleveraging massively as the index hits lows not seen since mid-2008.
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Can someone please share some further insight into this index? I read this site religiously and this is the first time I've seen reference to it in... a year min.
Its the 'who flung poo' index.
+100 lol
http://finance.yahoo.com/q/pr?s=HSKAX+Profile
Sounds eerily similar to the "low volume manipulated dysfunctional market killing market neutral hedge funds" stories I was reading here in April 2009. I guess that means another 100% rally is upon us.
No doubt, these guys were short Dollar Thrifty (up another $5.50 today) and other consumer discretionary and were probably long RIG, BP, HAL, etc.
No wonder they are getting killed.
They were probably trading using fundamentals, silly things, in this market!!
*
Every market participant must die before the wealth transfer is complete. First bears, now MN's, then bulls. Don't play in this casino.
You are just not allowed to short in this crazy market. When it does eventually fall it will the fastest drop in history with no shorts to take profits and slow the fall
With the increasingly positive economic numbers we're seeing on a daily basis now, to try and short this dip buying market is insane. Many of last week's issues have been resolved or at least stemmed for a while. What we are seeing is a market now trading on better fundamentals.
Even a broken clock is right twice a day. To short this market would be disasterous, but not because of bullshit positive economic numbers. It's because the Fed and other CB's are going to continue to flood the market with liquidity until we all drown in it.
Bzzz. Wrong again Harry. Consumer spending was up and savings were down. Not positive.
But I hope you go long Harry. Go ahead. Bet the farm. Put everything on the SPX. Please, please go long Harry.
Been long for several months. I am "betting the farm" on the strength of the numbers and following the momentum. Pretty simple if you just step back and look at it.
I hear you Harry. Don't change your position. Stay right where you are. You're in a good place.
I have a new avatar for you:
http://tinyurl.com/2fzrobv
Please stop talking your book. Frankly I don't believe one thing from you or anyone else unless trades and/or account statements are posted. How much did you lose in 2008/2009? Let me guess, nothing.
LOL. This bulltard stocks-for-the-long-run "John Borchers" guy was posting, much like HW, on ritholtz in 2008 before the September waterfall. He never came back. A lot of the ritholtz regulars thought HW was either a John Borchers alter, since HW showed up about early Fall 2009, or just BR having fun with his regulars. After we take out the 2009 lows, we won't hear from HW....
He used to be on the old MW boards as well, spouting the same bs around July 2008. Back then it was the "Asia has decoupled" thesis. We all know how that turned out, although as you say, the final chapter has yet to be written. MW used to be a great thread and people like him started polluting it, but eventually MW changed the format and started selectively restricting comments so it didn't matter anyway.
The funny thing about it is... Harry (Jimmy) doesn't really gain much from talking his book here at all.
What I do find interesting, however, is the comment on fundamentals. If one were to look at the Leading Indicators as a sign of continued market momentum, you see a divergence between the Conference Board (better) and the ECRI (incrementally worse).
I wonder which one of the two provides a greater weighting for stock market levels in the underlying computation???
I agree Asset. We all know, however, that we are near the end of our recent liquidity driven cycle when people start rationalizing any numbers to justify a price multiple. This is nothing new, it repeats over and over again thru cycles.
I bet he boarded up the farm right now and is waiting with a loaded shotgun for the foreclosure cops to show up :)
Harry,
Here is another simple question for you. Did Greece solve it's debt problem by getting more debt?
Any response would be much appreciated.
Confusion here about HSKAX I think - unless I am wrong it is NOT an index. It is the NAV of an individual fund - run by Highbridge. See below for description from Bloomberg -
"Highbridge Statistical Market Neutral Fund is an open-end fund incorporated in
the USA. The Fund's objective is to provide long-term returns in all market
environments from a broadly diversified portfolio of stocks while neutralizing
the general risks associated with stock market investing. The Fund invests in
equity securities believed to be undervalued by Highbridge Capital Management."
Seems wrong to me to draw the inference that because this find is doing badly, therefore all similar strategy funds must alko be doing badly.
You are of course 100% correct. It is a single fund and therefore means absolutely nothing. As you can see nobody cares though because it "fits" the story of the terribly "dysfunctional market" you see?
+10
Depends. If there was a sign of upcoming market collapse back in late 2007, it was the implosion of market neutral and various arbitrage funds.
Tyler is right on the money in here, when market functions well, their models do well because those guys are the true smart money on the street. If something is funky, they first know it and they first flee. And when they do, it kills the liquidity and sets the stage for possible trouble.
And if those guys are late in covering their asses, they do not survive, no bailouts for them, they are done. That's why they are the smart money, otherwise they do not survive for long.
I would be interested to see how convert arb as a whole is doing.
x 100
http://www.syzbank.ch/filedownload.lbl?uid=3E166DE8-3647-43BA-BCF2-7BB01F3DC681&disposition=inline
What's the big deal? A three percent price drop? What am i missing?
For about two minutes I expected to see the USD drop alongside a declining stock market... well, why not.
That was an extremely strong manufacturing report today. It's difficult to deny that this recovery has gained solid footing. Just look at new orders and the employment component. Both are excellent leading indicators. We should see a week of strong numbers all the way around.
Whatever bias to the downside set on Friday, has officially dissipated and swung positive quickly.
Dear HarryWanger, is AA confirming your thesis or do you typically use it as a "contrarian indicator?" Manufacturing does tend to use aluminum.
How did you know HappyWanker was an Alcoholic? Or is that Alcanholic? ;-)
The ISM is a sentiment indicator. Second, manufacturing makes up only 9% of total employment currently (vs over 20% in the early 80s) and a much smaller portion of the economy than ever before. Third, exports are drying up to Europe and the export boom to Asia based on the Chinese stimulus is waning as that stimulus is all spent. Four, a lot of strength in manufacturing is from inventory rebuilding. Five, most final demand, which inventory is being replenished for, is derived from govt transfer payments or the liquidation of savings, which shows this demand is unsustainable. All in all, the govt can't continue selling bond issues to the federal reserve, handing the proceeds to Americans, having Americans spend that money, seeing this spending run down inventories, then claiming mission accomplished because GDP went up (especially when corporations thus far have been simply hoarding the money rather than investing in employees and capex).
Dude, don't burst his bubble - can't handle the truth ;)
Well they can do it for a while...but as I've said, there's a time-sensitive element built into the equation which they're radically underestimating. That's because they've never had a situation like this one before (despite Uncle Ben's pontifications). They've had it easy up to now: liquidity + confidence + fat yield premium = recovery. Thereafter momentum would build on its own. All they had to do was push and aggregate demand would follow.
The first clue that they're in for a rough time is what we all know: the last 3 cycle recoveries took longer and required more liquidity each time. So that should have been built into their math. However what was not foreseen and isn't factored in is the extent of damage on the demand side and the strong headwinds to confidence. There's a good chance the economy hasn't just dipped cyclically but has actually rest at a lower level. If that's correct then their mainframe will blowup. Look for any signs of smoke coming out of the basement at the Fed to go short.
M3 annual ROC is negative, -4%
yeild curve although still steep is flattening
volume on up days is well below average, down days well above average
commercials have just recently gone net short the ES
bullish sentiment is at or near record high levels (rydex bull/bear funds at all time bullish high for example)
Good numbers = should numbers. Dont you know these guys invented "ceative accounting" and the numbers are misleading? Broke yesterday , found a penny today numbers up 100%. Perception is not greater than reality to those who understand this. Ive seen your photo Wanger, looks are everything to you,perception of yourself is greater than the reality. I like the flag better.
Seriously, every time I post a positive or strong economic indicator, everyone lines up to either explain why it's a useless indicator, it's manipulated, they use creative accounting, etc., etc.
I bet if any of those indicators came in light, all of the same people would be posting how terrible the numbers are and using those same numbers to justify a bearish stance.
You can't have it both ways. The numbers we're seeing are better. Period. Try and rationalize it anyway you want but there's no denying better economic numbers. And as these numbers continue to roll in, it will become much more clear to many sitting it out that the market is indeed rather inexpensive here.
If you can't see the Ponzi scheme - your clearly delusional.
Good point. He will see it only too late.
He has been seeing "it" since 12 months while the blogging bears keep fighting the market. I find it hilarious.
Exactly. I've been hearing the same thing like a broken record since the S&P was at 900. I still find it rather funny.
The market is going up because the market is going up.
We can't lose!
Funny I have been hearing the same thing since DOW 10,000... the 1st time, the 2nd time and now the 3rd time. Some might say "like a broken record". Short-term party on Garth, medium->long term, well it's not going to be pretty when the liquidation begins, until then... party on. The system as was known is toast, full on collaspe in due time, liquidation of the non-performing liabilities, if enough humans are around after rinse and repeat.
http://stockcharts.com/charts/historical/djia1900.html
Just out of curiosity Harry, were you bullish into the crash?
Welll he said the DOW would never go down below 9000 again. Like I said, a broken record.
http://messages.finance.yahoo.com/ETFs_%28A_to_Z%29/ETFs_S/threadview?m=...
there is probably a guy in Japan saying for the last 20 years the Nikkei won't be going below 10k.
I at least had some respect for him when I thought he was a trader, well, looks like he just piles in on the long-side... that is not a trader.
"All the gloom and doom about jobs here but I stood strong. The worst is behind us kids!"
2008... oh no
http://messages.finance.yahoo.com/Business_%26_Finance/Investments/ETFs_...
"As I said earlier based upon the facts and the impressive response by governments worldwide, the S&P will hit 1200 by year end. Easily. Just look at all the good news out there concerning credit and liquidity. This is a no brainer." 2008
http://messages.finance.yahoo.com/Business_%26_Finance/Investments/ETFs_...
What is interesting is his overconfidence byou using the word "facts". It was a no brainer but he got it wrong, completely wrong.
Short-term... party on Garth, medium and long term, system will collapse and liquidate just like it always does.
http://messages.finance.yahoo.com/Business_%26_Finance/Investments/ETFs_...
"I find it humorous that now the bears are telling us to wait until '09 for the pullback. Come on. What will you say when we hit Q1 and the numbers are getting better and better? Oh that's right, you'll be saying wait until Q2 and watch it fall. Too funny"
Mako...are you saying Harry Dangler is a hump & dumper???...LOL.
A well done expose' Mako...the Yea-hoo boards have been infested with these boiler room types for years.
Here's the thing I think you may be missing. The numbers being compared against are very weak numbers, so the comparisons are looking "great". Compare today's numbers against those of 2 or 3 years ago when there was real growth in the economy. What your seeing as positive year over year growth is a mathematical illusion. There is a difference between "the economy has stopped collapsing" and "the economy is growing".
Construction number strong. Sure. But break down the component parts.
Lets look shall we.
Private Construction -0.9% Private Construction +2.3%
March Private Construction the LOWEST since 1999.
Oh yeah and Feb revised LOWER to -2.1% vs -1.3% previously reported.
So the takeaway.......apparently (according to the government) you can spend your way out of debt (until you can't).
One final question on a different subject. One must ask how well did the decoupling theory work in 2008?
Rally on!!
The numbers aren't simply made up, rather they are BIASED. When even biased numbers are bad, then you know things are REALLY bad.
Right, you can't have it both ways. You can't talk about a recovery while the patient is still plugged in. A dead man walking with tubes of stimulants shoved down his throat, makes not an epic recovery.
Harry Dipshit,
Explain better economic numbers to me please. Car sales for example today, you'll say better year over year but not mention worse month over month, which is more present?????
GDP - 3.2%, what was the fourth quarter number?????
FUCKHEAD TELL ME WHICH ONE IS BETTER>>>>>>>>>>>>
You are the same guy that said in October 07 that the Dow was headed to 20k also. Learn to read and then tell me about rationalization because it sure as hell seems like you rationalize your "better" numbers.
ANSWER MY QUESTION, everytime I post something to you you refuse to reply. When faced with facts you have no answers. ANSWER MY QUESTION!
A true story about a local car dealer, who my BIL does consulting for. Eighteen months ago, they sold 100 cars a month. By March 09, they were selling 20 cars a month. Last month, it was 40. 100% improved sales???? But, still down 60% from 18 months ago. Bullish or Bearish?
Jim,
All we need to know is that currently GDP is comprised of 1/3 government transfer payments & government spending and everyone is ecstatic over a headline of Q1 3.2% growth in the "goods & services produced" of this economy.
It's hardly worth getting worked up over negative production...even when Harry says it's positive...he lies.
Dont forget the dollar is up 10% from yr ago and oil is up 40%. I dont give a hoot what stats say at the CPI level the consumer and well as multi-national sales & GM's will be impacted. These are forward looking indicators so Harry stop looking at the stimulus drive stats from 1Q and look at 2Q. The ISM by theway was in line and nothing more.
also the tightening in China and weakness in material stocks plus CHINA market going down are clear signs US econ will slow on top ofthe problems of wanning stimulus. Its truely unreal how some cant see the forest from the trees.
Many economic indicators are improving. The underlying issue is sustainability. Inflation adjusted, economically earned income is flat in March (increased by .02%). The so called recovery is driven by transfer payments, a drop in tax collections, use of savings, and likely non-payment of mortgages.
We are effectively in a race between real economic growth and national insolvency.
Therein is the problem - to have real growth you have to produce something - being a service economy just isn't going to cut it. Where is all the heavy industry? The R&D even?
Outsourcing doesn't look very clever anymore!
BTW - Q1 2010 inflation adjusted, economically earned income is lower than Q4 2005. It's all about the aggregate debt and the income. Increasing aggregate debt without a commensurate rise in income is most unhealthy.
Back over 1200 just like that. I believe we now have confirmation that this market will continue to power higher after hanging around 1200 so long. The next leg up is confirmed by today's action on a technical level.
This market will keep confusing and frustrating bears until it won't. The "overbought and extended" screaming bears are just as dumb as the "oversold and too cheap" idiots in a bear market.
Both perma crowds have no clue about trading.
I just don't understand why 99% of all bloggers and comments are so downright negative and let their perception of the economy cloud their mind when it comes to trading. How amateurish.
godfader, you seem to be on the wrong site. This isn't a trading forum and few of the regular people here treat it as such. That is likely why you cannot follow the rational discussions we have here. Anyone here could be long/short or both at any given time -- even while saying they think the economic recovery is being cobbled together with spit balls and used toothpicks...your assumption that everyone is somehow on the other side of the market is "amateurish" and might be more at home at Yahoo.
Excuse me, but I kept being confused by the "ponzi market" and "dysfunctional market" comments in this and other threads.
It appears to me that to 9 out of 10 people on this site making money on the long side is an unfamiliar concept bordering on blasphemy. Unreal.
Borrowing trillions to solve a debt crisis? What is there not to understand? How exactly is this going to end well?
Harry, maybe you shouldn't count your chickens so quickly...it's still early -- especially in a long week. Can I ask how you think the US consumer is going to be able to keep pace with income dropping? How long do you really think they can continue to spend more than they earn and have us pull ourselves out of this? Just because the market likes to blow off important details doesn't mean we shouldn't all question the sustainability.
Those questions do not make people "perma-bears" as you'd like to be so quick to label -- it simply means people are putting rational thought into how we will get from here (not so great) to where we want to go.
I've said it a few times. They are not going to let the market drop. It's a gamble with big stakes to reliquify credit and rebuild corporate balance sheets. They're also hoping for a "wealth effect" on consumers. It's a grave miscalculation and a damaging blow to US sovereign balance sheet. It will have the opposite of a wealth effect on most consumers who are not able to participate due to depleted wealth, high debt and damaged balance sheets. It's only a temporary help to corporate balance sheets if the economy has reset to a lower level. Corporations will continue to reduce capex and employment and other issues are left unaddressed. It's meant to be a temporary stimulus to financials but their balance sheets are beyond repair from just trading and equities alone in a deflationary environment. They'll continue to be zombies begging at the Fed trough. But we'll see DOW 15K before the end of the year and be closing in by the November elections.
One failed auction ends your theory. IF not for the FED buying the paper, it would have already happened. Look at the new rates they just put out today on I-bonds cutting the rate in half. They even lowered the fixed rate. Gee wonder why? At these measly rates at the TRSY for any of their products, people will move along and put their money elsewhere as they have been doing for some time now. The FED is the only ones saving the TRSY auctions right now.
Asi continue to see low volumes moves up and high volume moves down I continue to sell longs and add to hedges. I think the russel has 30% downside form here as normalized GDP gets rationalized at 1-1.5% as we move in 2011 at most.
The only reason the economic data looks to appear better, is the tax refunds people are blowing through like mad, and also charging their credit cards right back to the max, and many of them probably have purposeful intentions of not paying a single dollar on those cards and default on purpose. When you tell consumers this is the game we want you to play, then the government should expect people to do just that. Why should they pay for anything they buy these days, just ask for a bailout on public TV. Also, what happens when the tax refunds are spent? Do we get another stimulus packages going again?? The people running our FED and TRSY have planted dynamite in our system, and the fuse is getting shorter and shorter.
I think the reason a lot of people tend to remain bearish is that they expect the market, some of the time, to reflect what is happening on the ground. Biased numbers aside, un'mployment, housing, taxes, deficits, it seems like these problems are still getting worse; not even just that, but consumer spending shoed an increase bcause the price of ordinary things has gone stratospheric....wtf dos that say about the justification for this equity rally!
How long will Congress extend unemployment and Cobra benefits? How many more loan mods and homes refis at lower principle do you think will be requested? How long can tax increases be put off? How long can States wait for more stimulus before massive layoffs? How many more sovereigns will need bailing?
I don't agree with what Harry says but I find it distasteful that a lot of you think that insulting him is an appropriate response.
Look, if it makes one THINK about one's own views then that is a GOOD THING. I am big time bearish, BUT I have wondered, given the moves over the last year, whether I am right or not.
If Harry's comments make me or us think about things, then that is good. Otherwise ZeroHedge just becomes a bunch of zealots arguing their own viewpoint and not allowing any dissension from that viewpoint.
By the way, to those posters who don't know the difference between your and you're, you're certainly not going to win me over to your side of the argument if you can't even use correct grammar.
DavidC
I think people here respect traders - but not gamblers. If you read Harry's post prior to early May, you'll find out he's more gambler than trader. As I mentioned before - seeing him post was akin to playing Blackjack on some table where some guy hit 10 blackjacks in a row - and hearing him brag all night about how good he is at Blackjack.
On the other hand, you will see people post opposite views - and the ones that don't get "junked" are the ones who usually have a valid point to make. Calling out that the ES will hit 1160 gets no props from me unless they have a legit reason why they they think so - especially during this time of algo-based buying.
I would also like to know the answer to Popo's query:
Just out of curiosity Harry, were you bullish into the crash?
DOW/SP500 intra day chart gives bullish signal.
Interesting ...
MARKET UPDATES:
http://www.zerohedge.com/forum/latest-market-outlook-0
it's not ever going to be a "recovery" at zero % interest rates.
thats like the dying man on the life support system getting a massive dose of morphine and telling everyone how great he feels.
it's not real, its delusional.
pull the plug on the life support system, whack interest rates up a few percent suddenly and see how "recovered" it is.
I can't help but think in retrospect, Tyler, how prophetic this post has been. No doubt hindsight is 20/20 (in my case, not yours), but it was undoubtedly prophetic! I just watched the Dow drop 324 points today, just one month after this post. Wow!
May swoon, June gloom!