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Unsatisfied By Frontrunning The Fed - Presenting The Most Likely Short Squeeze Candidates

Tyler Durden's picture




 

Now that everyone knows that the only real macro trade is frontrunning Brian Sack, and fundamental analysis and its various derivatives are as dead as the dodo, there is one more trade that is a sure way for investors to make money: piggyback on short squeezes, especially with the assistance of State Street and the likes, whose only job it appears is to make increasingly more stocks impossible to borrow and forcing outright buyins in more and more names (more on that shortly). As shorts across all sectors have been trampled by endless rounds of liquidity, without regard for logic or bubble valuations, the desire of the bears to press a market that is now pricing in about $3.5 trillion in risk asset support (courtesy of QE 1, Lite and 2) or about 30% of the total market cap, isolating the names that have the highest Short Interest/Float and jumping on board may be the one profitable trade in addition to selling various CUSIPs to the Fed's gaping black hole. So what names should one invest in (and we use that in the most derogatory sense imaginable)? Luckily, Morgan Stanley has updated their most shorted names presentation. Keep in mind that these names are massively shorted for a reason: they are all mostly bubbles and deserve to trade orders of magnitude lower. But such is the reality of a market bubble - there is no reality. It is all just hype and "story" themes, not grounded in fact whatsoever. But that does not matter. It is all about the Fed. So without further ado, here are the names that will likely see the most indiscriminate offer lifting as more and more shorts are pulverized by Brian and his henchmen.

First, we present the listof names that have the most of their float shorted, spread by market cap bucket.

Buying a basket of these most shorted names virtually guarantees that as the Fed's dollar destruction continues one may, just may, recoup some of the losses in the dollar's purchasing power, however unlikely. It is now clear the Fed will stop at nothing before destroying capital markets, the middle class, and the reserve currency.

For a more granular list, one that passes through Morgan Stanley's Adjusted Short Interest screen, here are the 100 or so names by various industries that one can be certain will be subject to State Street and Prime Broker buy in requests as soon as the next few days. After all, there are lies to be uttered over the next few weeks that the market is up, and the economy must be improving, so that the midterm elections go smoothly and as planned:

And for those wondering why financials, tech and consumer discretion are the "leader" sector in the market, wonder no more - they just happen to be the most shorted ones. And how else can State Street justify its massive bonuses unless it manages to incite a industry-wide buy in. After all, they have been doing so well for the past 18 months - why stop now? Expect much more outperformance from this three-headed guard dog of Hell as the government continues its outright war on unpatriotic and racist shorts.

And in case it is not clear, we present the above data with supreme disgust. Disgust aimed at that one criminal organization that has made the stock market a farce, wrapped in a joke, inside a tragicomedy.

 

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Fri, 10/22/2010 - 12:09 | 669859 Clark_Griswold ...
Clark_Griswold Hedge Mnger's picture

"inside a tragicomdey"... that is the mother of all clusterfucks.....

Fri, 10/22/2010 - 13:01 | 669974 MarketTruth
MarketTruth's picture

tragicomdey... clusterfucks... some call it a circle jerk, yet most of us simply call him Ben Shalom Bukkake.

Fri, 10/22/2010 - 13:07 | 669989 dan10400
dan10400's picture

I knew there was a Japanese connection somewhere other than monetary policy...

Fri, 10/22/2010 - 12:11 | 669862 firstdivision
firstdivision's picture

Speaking of which, is the entire NASDAQ going on a short squeeze?  up about 1% from yesterdays low. 

Fri, 10/22/2010 - 12:11 | 669863 NOTW777
NOTW777's picture

get ben's trading alerts - $79.95

Fri, 10/22/2010 - 12:11 | 669864 RobotTrader
RobotTrader's picture

Don't forget the ETF's.

400% of the shares of IWM and XRT are sold short.

Fri, 10/22/2010 - 12:15 | 669872 Tyler Durden
Tyler Durden's picture

It seems that nobody understands that ETFs are merely hedge fund hedges to long positions. SPY is the most shorted security by the entire hedge fund world, as most now pair trade with the market in hopes of generating at least a little incremental alpha on the long leg. Which is why the ETF community will never admit to structural issues within ETFs as it would eliminate the buying interest in single name stocks.

Fri, 10/22/2010 - 12:39 | 669928 Steak
Steak's picture

When it was explained to me it seemed so common sense that I feel silly for not recognizing it before.  Just to give an example, Schwab has a new line of ETFs.  They use JPMorgan as the custodian (i think thats the right term) of these securities.  So every time someone buys a Schwab ETF long then JPMorgan is holding a short position in the same security.  If one thinks back to the big disruptive events (08 crash, 10 flash crash), liquidity dried up considerably.  All these ETF positions outstanding in another disruptive event would be longs that cannot be sold (at least without massive haircuts due to no liquidity) at the individual investor level, and profitable shorts at the institutional investor level.

I have to hand it to the folks peddling these securities, very very smart on their end.  They give the public what the public is demanding, and they get a massive short position that is perfect for a crash where liquidity dries up.

Sat, 10/23/2010 - 13:02 | 671945 Bananamerican
Bananamerican's picture

"smart" like a carny....

Fri, 10/22/2010 - 20:30 | 670886 max2205
max2205's picture

Remember when you couldnt short or naked short. WTF happened with that.

Fri, 10/22/2010 - 12:16 | 669874 cswjr
cswjr's picture

400%!!  Seriously?!?

Fri, 10/22/2010 - 12:38 | 669925 Mont Bleu
Mont Bleu's picture

IWM is currently at 87%, but you're right on with XRT (Short Int.: 60.2M shares, Outstanding: 21.8M shares)

Fri, 10/22/2010 - 12:15 | 669873 SheepDog-One
SheepDog-One's picture

Good, I hope all the shorts are squeezed to oblivion and stop shorting, leaving the FED and Bernanke holding Brian's sack.

Fri, 10/22/2010 - 12:18 | 669878 bada boom
bada boom's picture

Umm, Umm, Good!

Fri, 10/22/2010 - 12:18 | 669879 SheepDog-One
SheepDog-One's picture

Best headline Ive seen in a long time- 'G20 to Geithner-"You're Joking, Right?' Good for a laugh, ah yea its all under control, sure.

Fri, 10/22/2010 - 12:24 | 669889 Steak
Steak's picture

In this business we must always be looking forward to try and figure out where things are going.  But at times we can gain mightily from looking back.  I've gone far afield with playlists, from House to Funk to even plumbing my sister's itunes.  Not today.  I present the efforts of returning to my bread and butter: driving, pulsing, booming, progressive and uplifting trance.

How many of us have them? (a playlist): http://www.youtube.com/view_play_list?p=2D93C314EE324D8B

Fri, 10/22/2010 - 12:31 | 669911 kridkrid
kridkrid's picture

Unrelated, but Bair, Frank and Volcker to speak together... http://www.bc.edu/offices/pubaf/news/2010/financial_reformconf10122010.html

If you were allowed a question or two, what would they be?  (I have a slot and it'll be recorded)

Fri, 10/22/2010 - 12:36 | 669919 SheepDog-One
SheepDog-One's picture

Id ask them where they sent their applications for their present jobs, Barnum and Bailey?

Fri, 10/22/2010 - 13:01 | 669978 tallystick
tallystick's picture

I would want to know if the FED should be allowed to hold CDS or similar derivatives, and if not, how will financial reform legislation address unwinding Maiden Lane? In particular, how should they deal with unwinding the large CDS position on MBIA and AMBAC the FED inherited from  Bear Stearns,  as well as the AIG positions?

http://www.newyorkfed.org/markets/ML_Holdings.pdf

http://www.nakedcapitalism.com/2010/01/more-of-that-secret-maiden-lane-i...

Fri, 10/22/2010 - 12:39 | 669927 merehuman
merehuman's picture

vanpires , vultures and scalpers like ticks on a corpse.

Profits are more dear than our country to many of you. This is disgusting to me.   Am done posting here, in the end we all get what we deserve.

Fri, 10/22/2010 - 12:50 | 669954 scratch_and_sniff
scratch_and_sniff's picture

The mother of all round trip trades.

Fri, 10/22/2010 - 12:59 | 669967 rumblefish
rumblefish's picture

should this be interpreted as the greater the short interest/float  the greater the upside for a squeeze?

Fri, 10/22/2010 - 13:27 | 670047 system failure
system failure's picture

FED is the market and everybody and anybody who is left are trying to front run each other. Hot potato gaming must start or we will flatline like the Hang Seng extended lunch time each day. See what happens when nobody throws some BLS bullshit statistics, or a mad cow bone to scratch bite and snip at until a HFT explodes in either direction. Investing w/o any regulatory agency, (SEC, LOL) has become nothing but ROBOtrading games.

Fri, 10/22/2010 - 13:40 | 670076 Thunder Dome
Thunder Dome's picture

THERE IS NO MARKET

Fri, 10/22/2010 - 14:34 | 670229 rocker
rocker's picture

And to think Prechter said to short the market again a couple of weeks back. Just like he did in February.

The last time he did this we rallied 200 points in the S&P and over 1000 points on the Dow.

Prechter also believes the "FED only matters for a couple of days", his quote. He should learn the markets first.

The FED can manipulate the markets as long as they want to print for Bernankee's CB buddies like GS.

Fu*k his double zigzags, tripple extended flats, and his best. I just fu*ked up. And he then says "Sorry".
Fri, 10/22/2010 - 14:17 | 670169 Biff Malibu
Biff Malibu's picture

So I tried to explain to my 71 year old dad why the market keeps going up, getting prepared to unleash my vast ZeroHedge knowledge I have acquired regarding FED POMO days, dollar devaluation, etc. and before I can say anything at all he says "because the Republicans are going to win in November!"  Uhhhhh....yeah...ok...nevermind... 

Fri, 10/22/2010 - 14:49 | 670260 michigan independant
michigan independant's picture

Same issue here on my end but I did convey to Him to preserve capital and do not chase returns at all. He is tranfixed on Energy dividend stocks until I showed him a HFT trade on a energy company. I did manage to convey in simple terms it is rope burn for the longs to hold right now since the market is for "speculation"  rent only. History did convey Equity did survive and when the QE pops we can sit down and look then only since energy stocks are the last step to the stone age if they fail so we will wait in a debased currency market.

TD is correct...

It seems that nobody understands that ETFs are merely hedge fund hedges to long positions. SPY is the most shorted security by the entire hedge fund world, as most now pair trade with the market in hopes of generating at least a little incremental alpha on the long leg. Which is why the ETF community will never admit to structural issues within ETFs as it would eliminate the buying interest in single name stocks.

Also the Fed should be ashamed of itself for ZIRP for it is evil to the Elderly. My father was born in 1936 and worked very hard. The FOMC hubris is a guilty as both Party's are incompetant.

Fri, 10/22/2010 - 15:11 | 670324 realdeal
realdeal's picture

I use data explorers to screen for squeezes.  DXPL <GO> baby!

Fri, 10/22/2010 - 20:28 | 670883 max2205
max2205's picture

I am going on a boat for a week with no Internet access. Flat and outta here. Hold down the place for me.

GL!!

Fri, 10/22/2010 - 22:04 | 671038 No More Bubbles
No More Bubbles's picture

It's astounding that anyone would advocate buying heavily shorted stocks that are fundamentally worthless. This market is beyond a joke.

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