Smart Money

Despite Rising Market, "Smart Money" Sells For Record 17th Consecutive Week

Another week, and another quiet exodus by the "smart money" clients of Bank of America (hedge funds, institutionals and private money), who collective sold $218 million in stocks, the 17th consecutive week of selling completely oblivious of a market that "wants to go higher" according to Bob Pisani, and as BofA notes, "continuing the longest uninterrupted selling streak in our data history (since '08)."

These Are The Most Widely Held Stocks By Hedge Funds

"Hedge fund portfolio density rose to record levels in March, exceeding even the Financial Crisis highs. Hedge fund returns continue to grow more dependent on the performance of a few key stocks. The typical hedge fund has 68% of its long-equity assets invested in its 10 largest positions."

16 Months & Counting...

These are not normal times; treating them as such will likely turn out to be a grave error...

"We Should Be Concerned" - Stock Buybacks Plunge Most Since 2009

After snapping up trillions of dollars of their own stock in a five-year shopping binge that dwarfed every other buyer, U.S. companies from Apple Inc. to IBM Corp. just put on the brakes. Announced repurchases dropped 38 percent to $244 billion in the last four months, the biggest decline since 2009, data compiled by Birinyi Associates and Bloomberg show. “If the only meaningful source of demand in the market is companies buying their own shares back, then what happens if that goes away?” asked Brad McMillan, CIO of Commonwealth “We should be concerned.”

Everyone Is Still Selling: Biggest Monthly Outflow From Global Stocks Since US Downgrade

One recurring question over the past few weeks has been "who is buying" stocks in a world in which not only the smart money, but everyone else too is selling. The latest Lipper data will not provide the answer because as BofA reports, in the latest week there was another $7.4bn in outflows (the 5th straight week) driven by $4.8bn in mutual fund outflows and $2.7bn ETF outflows, leading to a $44bn equity exodus past 5 weeks, which as Michael Hartnett points out is the "largest redemption period since Aug’11", or when the US downgrade sent US stocks into a bear market tailspin.

"We Are Unsure Whether To Wear A Helmet Or A Diaper" - Merger Arb Funds Crushed

While company officers - who have given up on major stock upside as a result of busted M&A - and investment bankers are lamenting the bursting of the M&A bubble, some of the biggest losers are on the buyside, where merger arbs have seen billions in paper profits turn into billions in paper losses in moments upon the announcement of deal termination. Indeed, broken deals have whipsawed hedge funds that focus on merger arbitrage. As the NYT poetically puts it, according to one "arb" the current mood of the industry: "Every day is like showing up unsure of whether to wear a helmet or a diaper."

Another Hedge Fund Hotel Explodes: Endo Craters

The pain today is especially acute for a lot of hedge funds, because as Goldman reminds us after the spectacular blow ups of Valeant and Allergan, and recently, the plunge in uber hedge fund hotel AAPL, Endo itself is one of the stocks that has the highest hedge fund concentration in the S&P.

Has The Long Yen Trade Run Its Course?

Despite an unprecedented amount of monetary easing taking place at the Bank of Japan, the yen has - since the middle of 2015 - been on a consistently strengthening trend versus the USD. As paradoxical as it may seem in a period when the Fed talked about, and then did raise interest rates coincident to the BOJ firing off ever more arrows, the strengthening yen has been the reality. That reality may be about to take a breather, though, as too many investors have moved to the same side of the boat in betting on yen appreciation while the “smart money” is net short the yen.

Will The (Falling) Buck Stop Here?

The recent decline in the U.S. Dollar has people wondering where it might stop; its chart suggests right here is as good a spot as any.

In Latest Blow To Hedge Funds, AIG Redeems $4 Billion; CALSTRS Says "2 And 20" Model Is "Off The Table"

The pain for hedge funds is only just starting: Chris Ailman, who runs investments at CALSTRS, said in a Bloomberg Television interview from the Milken conference that the hedge fund industry’s two-and-twenty fee model is “broken” and “off the table” for large institutional investors. And then the latest blow to the suddenly struggling industry came overnight from none other than the firm which started the bailout regime, AIG, which following its earnings report announced that the insurer - burned by losses on hedge funds - has submitted notices of redemption for $4.1 billion of those holdings. “As of today, we have received $1.2 billion of proceeds from those redemptions."

"This Has Been The Longest Selling Streak In History" - 'Smart Money' Sells For Record 14 Consecutive Weeks

"Last week, during which the S&P 500 fell 1.3% in its biggest weekly decline since early Feb., BofAML clients were net sellers of US equities for the 14th consecutive week, in the amount of $2.8bn. As we noted last week, this has been the longest uninterrupted selling streak in our data history (since ‘08)—previously the longest streak was 12 weeks (in late ‘10)."