Worst Is First In 2013 As Most-Shorted Names Soar (Again)

Tyler Durden's picture

From a week after the election, the most-shorted names in the major indices have been the massive outperformers and drivers of this market exuberance (+16.4% versus 8.4% market). That story has not stopped as 2013 has seen the squeeze continue as the year-end strategy of piling into the most-shorted names has worked. From the opening levels on January 2nd (with today seeing even more divergence), the most-shorted Russell 2000 names are dramatically outperforming. It would appear, as Bloomberg notes in its recent article on 2012's most-hated companies' outperformance, that "It's not just hard to be short, it is painful." Of course, they also note one manager's view that "The risk is that if this market rally has been based on short covering and that was all it was, then there’s no further money following, the rally is then either dead or not sustainable." Especially with net spec longs at near-record highs, this has unsustainability written all over it.


Since a week after the election, the most-shorted names in the US equity market have more than doubled the markets' performance!!


Though, arguably, post-QE3 there could be some more room for squeezes (as they remain 'winners' as it were, relative to the market)...


And that performance remains in place in 2013 - with today quite notably divergent...


Charts: Bloomberg

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q99x2's picture

Gold up. Oil up. Prepare for war.

Liquid Courage's picture

Beggars belief!


"Print a $1 trillion coin, and — presto — there’s a $1 trillion in spare capacity under the debt ceiling. Plus, since the coin isn’t going to make it into circulation, it should not be inflationary." 

The coin won't make it into circulation, but the "spare capacity" sure as hell will. Hey, idiots ... if it sounds too good to be true ... well ... can you get the rest?

chubbar's picture

OT and sorry for the long post but I feel it's important enough to get it out there.

"You're sound asleep when you hear a thump outside your bedroom door. Half-awake, and nearly paralyzed with fear, you hear muffled whispers. At least two people have broken into your house and are moving your way. With your heart pumping, you reach down beside your bed and pick up your shotgun. You rack a shell into the chamber, then inch toward the door and open it. In the darkness, you make out two shadows. One holds something that looks like a crowbar. When the intruder brandishes it as if to strike, you raise the shotgun and fire. The blast knocks both thugs to the floor. One writhes and screams while the second man crawls to the front door and lurches outside. As you pick up the telephone to call police, you know you're in trouble.

In your country, most guns were outlawed years before, and the few that are privately owned are so stringently regulated as to make them useless. Yours was never registered. Police arrive and inform you that the second burglar has died. They arrest you for First Degree Murder and Illegal Possession of a Firearm. When you talk to your attorney, he tells you not to worry: authorities will probably plea the case down to manslaughter.

"What kind of sentence will I get?" you ask. "Only ten-to-twelve years," he replies, as if that's nothing. "Behave yourself, and you'll be out in seven." The next day, the shooting is the lead story in the local newspaper. Somehow, you're portrayed as an eccentric vigilante while the two men you shot are represented as choirboys. Their friends and relatives can't find an unkind word to say about them. Buried deep down in the article, authorities acknowledge that both "victims" have been arrested numerous times. But the next day's headline says it all: "Lovable Rogue Son Didn't Deserve to Die." The thieves have been transformed from career criminals into Robin Hood-type pranksters. As the days wear on, the story takes wings. The national media picks it up, then the international media. The surviving burglar has become a folk hero.

Your attorney says the thief is preparing to sue you, and he'll probably win. The media publishes reports that your home has been burglarized several times in the past and that you've been critical of local police for their lack of effort in apprehending the suspects. After the last break-in, you told your neighbor that you would be prepared next time. The District Attorney uses this to allege that you were lying in wait for the burglars.

A few months later, you go to trial. The charges haven't been reduced, as your lawyer had so confidently predicted. When you take the stand, your anger at the injustice of it all works against you. Prosecutors paint a picture of you as a mean, vengeful man. It doesn't take long for the jury to convict you of all charges. The judge sentences you to life in prison.

This case really happened. On August 22, 1999, Tony Martin of Emneth, Norfolk, England, killed one burglar and wounded a second. In April, 2000, he was convicted and is now serving a life term.

How did it become a crime to defend one's own life in the once great British Empire? It started with the Pistols Act of 1903. This seemingly reasonable law forbade selling pistols to minors or felons and established that handgun sales were to be made only to those who had a license. The Firearms Act of 1920 expanded licensing to include not only handguns but all firearms except shotguns.

Later laws passed in 1953 and 1967 outlawed the carrying of any weapon by private citizens and mandated the registration of all shotguns.

Momentum for total handgun confiscation began in earnest after the Hungerford mass shooting in 1987. Michael Ryan, a mentally disturbed Man with a Kalashnikov rifle, walked down the streets shooting everyone he saw. When the smoke cleared, 17 people were dead.

The British public, already de-sensitized by eighty years of "gun control", demanded even tougher restrictions. (The seizure of all privately owned handguns was the objective even though Ryan used a rifle.) Nine years later, at Dunblane, Scotland, Thomas Hamilton used a semi-automatic weapon to murder 16 children and a teacher at a public school. For many years, the media had portrayed all gun owners as mentally unstable, or worse, criminals. Now the press had a real kook with which to beat up law-abiding gun owners. Day after day, week after week, the media gave up all pretense of objectivity and demanded a total ban on all handguns. The Dunblane Inquiry, a few months later, sealed the fate of the few sidearm still owned by private citizens. During the years in which the British government incrementally took Away most gun rights, the notion that a citizen had the right to armed self-defense came to be seen as vigilantism. Authorities refused to grant gun licenses to people who were threatened, claiming that self-defense was no longer considered a reason to own a gun. Citizens who shot burglars or robbers or rapists were charged while the real criminals were released.

Indeed, after the Martin shooting, a police spokesman was quoted as saying, "We cannot have people take the law into their own hands."

All of Martin's neighbors had been robbed numerous times, and several elderly people were severely injured in beatings by young thugs who had no fear of the consequences. Martin himself, a collector of antiques, had seen most of his collection trashed or stolen by burglars.

When the Dunblane Inquiry ended, citizens who owned handguns were given three months to turn them over to local authorities. Being good British subjects, most people obeyed the law. The few who didn't were visited by police and threatened with ten-year prison sentences if they didn't comply. Police later bragged that they'd taken nearly 200,000 handguns from private citizens. How did the authorities know who had handguns? The guns had been registered and licensed. Kinda like cars. Sound familiar?


"..it does not require a majority to prevail, but rather an irate, tireless minority keen to set brush fires in people's minds.." --Samuel Adams

CPL's picture

The problem wasn't the gun ownership.

It was the citizen trusting that a government worked in their best interests.

paddy0761's picture

You miss the point. The 2nd Amendment, and in fact all the amendments, of the Bill of Rights have nothing to do with the protection of citizens from other citizens. The Bill of Rights was penned for the protection of citizens from the standing army of the state. Rapists, muggers and home invaders have absolutely nothing to do with the 2nd Amendment; it is entirely about self defense from a government gone rogue. This dates back to the English Bill of Rights of 1869 upon which the US version was based. The current debate is a distraction; a red herring to facilitate the disarmament of the citizenry at a time when it will need to be armed and ready.

michiganmaven's picture

You sure you have the year right on the English bill of rights? Pretty sure our bill of rights is pre-1869... been a while since I read a history book though

chubbar's picture

I understand that point quite clearly Paddy. The problem, imo, by couching the argument for the 2nd amendment in those terms is that Joe IPAD can't even conceive of standing up to authority. Most folks are quite happy to be led off a cliff without any questioning whether it's being done in their best interests. Christ, put on a uniform of any kind, hell a dog catcher uniform would work, and you will immediately be seen as an authority figure. My main concern with being disarmed isn't because I anticipate having to stand up against the U.S. gov't. If the army, et al, went along with an order to imprison gun owners and completely disregarded posse commitatus then I suspect I would eventually become just another casualty of that effort. Moving on, I think that most folks believe in the right to defend themselves and families against intruders so I think this message is more effective in thwarting this insane drive to disarm law abiding citizens. That being said, you are correct.


slaughterer's picture

Russell 2000 seems to have hit technical resistance though all of a sudden slightly above previous highs.  "Unsustainability" is really becoming clear each and every day.  I give the market one more day of froth, and then... BOOM. 

Caracalla's picture

I agree.  I sold some stuff this morning and bought TZA and SPXU with the proceeds.  Hoping silver will touch that $27/ounce again and will pick some of that up on sale

CPL's picture

I can't find physical at 33, closest I can find it for immediate delivery is 41$ an ounce from Jewelery stores and gold smiths.  Everyone is waiting for new ore to be processed.  All the mines are on strike still or in the middle of riots.  So unless you find someone willing to sell it...if you aren't budging and I'm not budging then we are at an impasse.


Well, if you find any at 27 bucks let us know, we'll all line up behind you to buy some but the current ETA is pushing six months with a long line of people waiting for physical.

Caracalla's picture

Paper is $30 today.  Might be smart to grab it.  Might not go much lower

CPL's picture

I don't like the paper trade, I'd have a stroke holding it.  I like the physical.  If I need to sell it, I'll be selling it at $41 on street value and not a penny less.  Otherwise I'll wait until I need it for things like oil for vechicles and farm equipment.  However my cost average is well under 8 per ounce and picking up more silver is only an option if I can have it in my hand within the week.

The trust is broken to the point that the paper offered won't pay the bills, so my risk aversion levels are pretty high right now to any of the Commodities ETN's.  I literally dumped all my USD last week and switched all my capital to Canadian to delay, not avoid, delay the situation of loss (Canuck buck is going to shit the bed soon after).  If I hold the ETN, I'm holding a liability in USD which is the best looking horse at the glue factory right now.


That's all this all the paper offered is now.  A liability.  Big one, you do not want to be holding it, it's not silver.  Just paper and the tiny gain on paper is soon erased by proxy of inflation.  See you can make all the money you want now, doesn't buy anything.

$20 ten years ago you could manage to get groceries for a week.  Now, you can buy milk, eggs, bread, pack of gum and that's about it.


Panafrican Funktron Robot's picture

Not that technicals mean much, but there seems to be a pretty solid floor at $25, and at $85 billion in printing per month, JPM is going to have to turn the short on overdrive.

Umh's picture

$34 at some jewelry suppliers for sterling (0.925).

CPL's picture

Map them back to the X2 and X3 ETF's.  TZA and TNA and you can see the 'short'.  It's not individual companies being shorted, it's ETF's using a basket method.  Not sure of the stats now, couple of years ago the market volume was nearly 40% ETF driven.

IamtheREALmario's picture

These charts PROVE that we do not have a free market and capitalism is dead. In a free market, sentiment is the indicator of price. If something is loved and there is a lot of buying of it, then there is a shortage and price goes up. If something is hated, nobody is buying, everyone is selling then price goes down.

Those who manage market price (and all evidence shows that so called market prices are not free, but instead managed) move price in the exact opposite direction that free market dynamics would indicate. By moving price in the exact opposite direction that free market dynamics would dictate they profit most and steal the most from others who are under the delusion that price is determed by either fundamentals or free market dynamics.

To top off the cake the market price managers who defraud participants, then create myths to cover their fraudulent behavior. And these myths are propagated by a complicit media and sell-side support system.

Dr Benway's picture

Great post! I think the most ridiculous thing is the increasing divergence between what people are told the economic situation is like and what they experience in their daily life. So now things are supposedly better than ever?

Cognitive Dissonance's picture

"....the rally is then either dead or not sustainable."

In the land of the insane that which is unsustainable can remain unsustainable far longer than you can remain sane (and thus solvent).

CPL's picture

They don't need money to do any of this now though.  Just a news conference at around 2:30.

Dr. Engali's picture

The transports failing to break through and hold 5550 is interesting. Keep an eye on it.

Cognitive Dissonance's picture

Part of the peak insanity process is the breakdown of mental connections to reality and market correlations from the past.

Manthong's picture

“War is Peace.. Freedom is Slavery.. Ignorance is Strength”

Hmm.. where does this get you?

Dr Benway's picture

The linked Bloomberg article had some truly puke-inducing quotes from shills. I used to wonder whether the touts actually believed themselves but now I know better. It's supposed to be a good thing that even crappy overpriced stocks can never fall? Why not be honest about it then and write into law that every stock will rise a set amount per year?

This is how volume dies. No one can be long these stocks cause they suck, yet they can't be shorted or fall because of the squeeze. End result: zombie market with zero volume. Price discovery is of course long dead.

waterdude's picture

I'm thinking zerohedge is going to write the same surprised article in week 2 of '14...and '15...and '16.

And of course, zerohedge readers will pop in a bunch of comments about how anyone who made money on said stocks is a jerk and an idiot and  a big looser.


michiganmaven's picture

nah.. by then we will have crashed again... but you are missing the point of a broken market.. tha tis what this chart is all about. Not bullish or bearish.. just broken.

Darth Raider's picture

Martin was released after 3 years due to public outcry he held an illegal weapon and the law was changed to allow reasonable FORCE( not shooting people in the back as they were running away)

 what has your post to do with the article check your facts NRA Troll

Umh's picture

Even three years would have been way to much time to do for defending yourself.


Isn't it amazing how many "brave" men run like rabbits when their crowbar gets trumped. These "brave" souls just wander down the street and destroy some elses life.

lmile61's picture

hell again this happen!!!!!!! ecommerce web development