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Step Aside Apple: Presenting The Hedge Fund World's Newest Most Widely Held Stock

Tyler Durden's picture





 

Quarter after quarter we would recap the hedge fund world's infatuation with one stock and one stock alone: Apple. This inverse-mormon love affair hit its peak in the quarter ended September 30, when a record number of hedge funds were invested in AAPL stock. This was also the quarter when AAPL hit its all time high price and has since proceeded to slump by nearly 40% in four short months. Which was to be expected: hedge fund hotels always become flaming death traps when the sucker rally finally ends and what so many mistook and goalseeked for fundamentals, ended up being merely euphoria and momentum chasing as one after another marginal buyer put their money into a stock that seemingly could do no wrong or so we were told day after day. As of December 31, AAPL is no longer the darling of hedge fund groupthink. In its place we have a new hedge fund hotel.

Presenting: AIG, which with 80 hedge funds reporting it as a Top 10 holding (compared to GOOG with 73, and AAPL with 67), is now the stock that has suckered in the most hedge fund capital, and where any future growth will depend solely on pulling incremental dumb money in.

As a reminder: just as every most widely held name rises ever higher as the Beta chasers pretend they generate Alpha, while merely piling into one or several names, so once hotel, in this case cAIGfornia, starts burning down, the scramble for the exits is fast and furious.

The chart below shows AAPL's recent gradual rise and epic fall. AIG is now in the rising phase. The fall always follows.

Finally, it would be especially poetic if the one company that was there at the end of the beginning, and nearly brought down the financial system 5 years ago is responsible for the beginning of the end, and whose collapse the second time around completes what its first, bailed-out attempt, couldn't.

 


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Wed, 02/20/2013 - 20:15 | Link to Comment Big Corked Boots
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Why not? The Gummint has AIG's backs. It's not like they would go broke, or anything - they're too important to the economy.

Wed, 02/20/2013 - 20:20 | Link to Comment Say What Again
Say What Again's picture

This could be the ultimate sign of the "market-top" we've all been waiting for.

Wed, 02/20/2013 - 20:30 | Link to Comment I think I need ...
I think I need to buy a gun's picture

just when i thought it couldn't get any better it got better!!!!!!!!bahhwaaaaa....what a joke

Wed, 02/20/2013 - 20:41 | Link to Comment Say What Again
Wed, 02/20/2013 - 21:16 | Link to Comment Richard Chesler
Richard Chesler's picture

The cockroach that insures all other cockroaches.

Wed, 02/20/2013 - 22:20 | Link to Comment ShankyS
ShankyS's picture

It is the smart money roatating to the largest cockroach of all that is guaranteed to get bailed out before the rest when the shit hits the fan. Looks to me like more of a safety play or rotation from growth to capital insurance via government to me. See 911 and 2008. 

Thu, 02/21/2013 - 02:21 | Link to Comment Ness.
Ness.'s picture

What would King Cock-a-roach do?

 

March 13 2009 (Bloomberg) -- Billionaire Warren Buffett said he was offered two chances to help American International Group Inc.in the final days before the U.S. government intervened to prevent the insurer’s collapse last September.

 

“It wasn’t very tough,” to resist an investment, Buffett said. “They needed more than we could supply by far. I didn’t know the extent of it, but I knew that.”

Buffett’s narrative sheds light on AIG’s efforts to come up with a private solution to its capital shortage the same weekend that Lehman Brothers Holdings Inc. was imploding. The U.S. later agreed to take a 79.9 percent stake in AIG in exchange for an $85 billion loan after allowing Lehman to collapse.

 

“It’s like taking out a girl -- sometimes you know it isn’t going to happen (Becky ;),” Buffett said. “The time pressures, the degree of uncertainty, the depth of the possible hole (Becky ;), the need to get it through a regulatory body (again.. Becky ;) LOL.”  he said. “It wasn’t going to happen.”

Goldman Sachs Group Inc. and JPMorgan Chase & Co. were working with AIG in the days before the government rescue on a possible loan package of $70 billion to $75 billion, two people with knowledge of the discussions said at the time.

Willumstad, in Congressional testimony in October, acknowledged that AIG was “negotiating a transaction” with Berkshire and “working with JP MorganChase” before the government bailout, without providing details.

Regulators have since revised AIG’s bailout three times to ease the original loan terms and increase the bailout package to about $160 billion. AIG last week posted a $61.7 billion fourth- quarter loss, the worst in U.S. corporate history.

AIG stock has fallen 99 percent in less than a year. Shares rose 9 cents, or 22 percent, to 50 cents at 4:15 p.m. in New York Stock Exchange composite trading today. The stock closed at $49.04 on May 5, 2008.

 

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ayzHDv8W9HT8

 

The Buffett Rule.


And May God Bless the United States of America.

 

 

 

Wed, 02/20/2013 - 20:42 | Link to Comment derek_vineyard
derek_vineyard's picture

every parent should tell the story of aig to their children illustrating the great american business model and dream

Wed, 02/20/2013 - 20:43 | Link to Comment Stoploss
Stoploss's picture

Speaking of hedge funds, any body have any guesses?

 

http://uk.reuters.com/article/2013/02/20/markets-commodities-idUKL1N0BK2...

Wed, 02/20/2013 - 21:09 | Link to Comment scatterbrains
scatterbrains's picture

that couldn't  be tepper the tea bagger could it ?

Thu, 02/21/2013 - 10:06 | Link to Comment midtowng
midtowng's picture

AIG. That's just insane.

Wed, 02/20/2013 - 20:36 | Link to Comment McMolotov
McMolotov's picture

Remember, the Gummint "made a profit" from bailing out AIG. If the Gummint can "make a profit," anybody can. This really is a no-brainer.*

 

*As in, one must have no brain to believe this shit.

Wed, 02/20/2013 - 22:03 | Link to Comment Bunga Bunga
Bunga Bunga's picture

Betting on a non-default of a financial obligation, that's the business model of AIG ... essentially it is gambling, although not regulated like gambling. Of course, gambling is an economy too.

Wed, 02/20/2013 - 20:14 | Link to Comment Jason T
Jason T's picture

too widely owned to own.

Wed, 02/20/2013 - 20:14 | Link to Comment HomeBrewPrepper
HomeBrewPrepper's picture

TBTF bitches

Wed, 02/20/2013 - 20:19 | Link to Comment Say What Again
Say What Again's picture

How about; "too big to re-insure."

Wed, 02/20/2013 - 22:00 | Link to Comment Bunga Bunga
Bunga Bunga's picture

+TBTJ ... it's just a save bet, nobrainer

Wed, 02/20/2013 - 20:15 | Link to Comment booboo
booboo's picture

AIG makes a Black Hole look like a spewing galactic volcano.

Wed, 02/20/2013 - 20:15 | Link to Comment trollin4sukrz
trollin4sukrz's picture

rufk me?

Wed, 02/20/2013 - 20:21 | Link to Comment WhiteNight123129
WhiteNight123129's picture

Guys, you really do not get it.

AIG IS A GOLDBUG IDEA.

The first one who figures out why AIG is a goldbug idea has graduated to trade for real. I mean it, there is no SARC here. Whoever is sympathetic to Gold should be sympathetic to AIG. There is a very specific reason for it.

 

Wed, 02/20/2013 - 20:23 | Link to Comment A Lunatic
A Lunatic's picture

Um yeah, backing up the truck right now..............

Wed, 02/20/2013 - 20:29 | Link to Comment WhiteNight123129
WhiteNight123129's picture

It has to do with duration, the value of hte present good versus future cash flows.

Hint: How did the holders of fixed life insurance policy fare during Weimar? How were the life insurance companies who could repay the life insurance policies with confettis doing?

I am afraid to officially declare that Tyler has no clue of what he is talking about.

Wed, 02/20/2013 - 21:12 | Link to Comment scatterbrains
scatterbrains's picture

so then what does it say for AIG if gold is tanking ?

Wed, 02/20/2013 - 22:24 | Link to Comment Village Smithy
Village Smithy's picture

Insuring lives is one thing but insuring assorted financial time bombs that are about to explode is quite another. This to me is just the same old "look how far this stock has to run" sales pitch. 

Thu, 02/21/2013 - 10:39 | Link to Comment WhiteNight123129
WhiteNight123129's picture

Company has eliminated 90% of the derivatives book.

 

Wed, 02/20/2013 - 20:25 | Link to Comment Say What Again
Say What Again's picture

Who is the moron that goes though the entire thread and gives EVERYONE a "-1" ?

Wed, 02/20/2013 - 20:27 | Link to Comment ebworthen
ebworthen's picture

Krugman, Geithner, or Liesman.

Wed, 02/20/2013 - 20:46 | Link to Comment Say What Again
Say What Again's picture

I knew the TROLLS would come out of the woodwork when I asked that question

Wed, 02/20/2013 - 20:49 | Link to Comment trollin4sukrz
trollin4sukrz's picture

Whodafrvk you callin a troll? oo wait... nevamind

Wed, 02/20/2013 - 21:05 | Link to Comment Say What Again
Say What Again's picture

I just gave you a +1 for that comment.  I would give you a +10 if only I knew how.

Wed, 02/20/2013 - 20:57 | Link to Comment JR
JR's picture

It's the kids; it's after 3 o'clock and they're out of school (those that go to school).

Thu, 02/21/2013 - 00:25 | Link to Comment Lord Of Finance
Lord Of Finance's picture

Its the employees of AIG. They hope to get a promotion from the boss when they show em how they stood up for their company. I remember when the backlash started against AIG some years ago, and I remember seeing 3 different assholes out in public wearing AIG sweaters! I am not joking. These tools are company men.

Wed, 02/20/2013 - 20:29 | Link to Comment trollin4sukrz
trollin4sukrz's picture

I doan know who it is but I bet he/she/it is a total dick.

Wed, 02/20/2013 - 20:38 | Link to Comment Big Corked Boots
Big Corked Boots's picture

I bet there's an email from someone at AIG HQ directing employees to this page and telling everyone who has an account to downvote. To be followed tomorrow morning by an order for HR to fire everyone who actually has an account at ZH.

Wed, 02/20/2013 - 20:44 | Link to Comment McMolotov
McMolotov's picture

I'm sure ZH is blocked for AIG peons, just like it is at BoA:

http://www.zerohedge.com/news/2012-12-18/part-our-ongoing-effort-protect...

Wed, 02/20/2013 - 21:32 | Link to Comment Not Too Important
Not Too Important's picture

It was blocked at Schwab.

I won't do business with any financial instution that blocks ZH. Always a first question.

Thu, 02/21/2013 - 17:19 | Link to Comment mootsman
mootsman's picture

Zerohedge is no longer blocked at BofA.  It's not like anyone there get's any work done so they have to fill the void somehow.

Wed, 02/20/2013 - 20:31 | Link to Comment ebworthen
ebworthen's picture

So you're saying gold is much better insurance than anything you can buy from AIG, right?

Wed, 02/20/2013 - 20:26 | Link to Comment ekm
ekm's picture

Seth Klarman: "If you buy a security to sell it to a greater fool, if there are no greater fools left, then you are the greater fool."

 

Conclusion: Smart money has become the dumb one.

Wed, 02/20/2013 - 20:47 | Link to Comment fonzannoon
fonzannoon's picture

EKM seth klarman apparently has a large position in AIG. I don't know anything about Seth Klarman to know why AIG makes sense to him.

Wed, 02/20/2013 - 21:24 | Link to Comment ekm
ekm's picture

He's got one full chapter on 'distressed securities' in his book.

He is the super master of distressed securities. His prey is "smart money".

Wed, 02/20/2013 - 22:13 | Link to Comment fonzannoon
fonzannoon's picture

How is AIG distressed today? Why not just buy all the banks?

Thu, 02/21/2013 - 08:33 | Link to Comment ekm
ekm's picture

What I am saying, is that his philosophical conclusion relflects reality.

 

I never said he is infallible.

Wed, 02/20/2013 - 21:42 | Link to Comment JR
JR's picture

His Margin of Safety has the backing of being an insider: Klarman is a graduate of Cornell University and Harvard Business School[4] where he was a Baker Scholar and was classmates with Jeffrey Immelt, Steve Burke, Stephen Mandel (hedge fund manager) and Jamie Dimon. Klarman grew up in a Jewish[2] family in Baltimore, where his father was a public health economist at Johns Hopkins University and his mother taught high school English.[3] r

Before founding Baupost, Klarman worked for Max Heine and Michael Price of the Mutual Shares fund (now a part of Franklin Templeton Investments). He founded the Baupost Group in 1982, which managed USD 22 Billion as of 2010…

Klarman started The Klarman Family Foundation ($255 million in assets as of 2010) which donates to medical causes, Jewish organizations (such as the American Jewish Committee and Boston’s Combined Jewish Philanthropies), and Israeli causes. Klarman is the chairman of Facing History and Ourselves which develops classroom programs to combat anti-Semitism and bigotry.[2] Klarman also is active with the The Israel Project, a pro-Israel advocacy group that collects and provides information on Israel for journalists. He gave the organization $4 million between 2008 and 2010.[2]

Klarman is married to Beth Klarman.[2] Klarman is the older brother of Harvard Law Professor Michael Klarman.[citation needed]

Klarman is the key U.S. investor behind The Times of Israel, an online English-language newspaper which reports on Israel, the region and the Jewish world.[11][1

http://en.wikipedia.org/wiki/Seth_Klarman

His AIG position makes sense as in Paul Warburg:

“On October 29, 1929, the stock market crashed.  Thousands of investors were wiped out in a single day. The insiders who were forewarned [by Paul Warburg), a partner with Kuhn, Loeb & Co., which maintained a list of preferred customers] had converted their stocks into cash while prices were still high. They now became buyers.  Some of the greatest fortunes in America were made in that fashion…

“John D. Rockefeller, J.P. Morgan, Joseph P. Kennedy, Bernard Baruch, Henry Morganthau, Douglas Dillon—the biographies of all the Wall Street giants at that time boast that these men were ‘wise’ enough to get out of the stock market just before the Crash.  And it is true.  Virtually all of the inner club was rescued.  There is no record of any member of the interlocking directorate between the Federal Reserve, the major New York banks, and their prime customers having been caught by surprise.  Wisdom, apparently, was greatly affected by whose list one was on.” – G. Edward Griffin, The Creature from Jekyll Island, pp. 497-503.

Wed, 02/20/2013 - 20:26 | Link to Comment ebworthen
ebworthen's picture

Crime pays, apparently.

Wed, 02/20/2013 - 20:30 | Link to Comment Unprepared
Unprepared's picture

AIG = Apple Insurance Group

Wed, 02/20/2013 - 20:37 | Link to Comment WhiteNight123129
WhiteNight123129's picture

Off topic

THe slam down on Gold and Silver?

http://www.cbc.ca/news/world/story/2013/02/20/iran-nuclear-warning.html

Apparently Iran is stepping up its military capabilities or that is what the news say.

 

Wed, 02/20/2013 - 20:50 | Link to Comment trollin4sukrz
trollin4sukrz's picture

I can hardly wait fror this current world war to "step it up." These skirmishes in the opium belt are getting lame. We need a real Krugman moment with some real shit getting toasted! Even so, come the destroyer...

Wed, 02/20/2013 - 20:41 | Link to Comment tom a taxpayer
tom a taxpayer's picture

I can't figure out AIG. Can anyone makes heads or tails about AIG CEO, President, and Director Bob Benmosche?

"During his first meeting with employees, Benmosche stated that Congress was composed of "crazies," that he would not cooperate if asked to testify before Congress, and that New York Attorney General Andrew Cuomo, who had investigated AIG, "doesn't deserve to be in government." He later asked for a personal private jet and said that he might quit over government-imposed pay restrictions.[7]"

http://en.wikipedia.org/wiki/Bob_Benmosche

Wed, 02/20/2013 - 20:54 | Link to Comment lotsoffun
lotsoffun's picture

simple.  sociopath bully.  anybody stand up to him?  he's got nothing to lose.  remember dante's inferno?  'better to rule a day in hell then serve...'

 

Wed, 02/20/2013 - 20:45 | Link to Comment williambanzai7
williambanzai7's picture

This is the epitome of the dumb money follows dumb money principle.

Wed, 02/20/2013 - 21:10 | Link to Comment JR
JR's picture

The pond alga is rising to the top. When you’re talking about free enterprise prosperity and AIG is at the top, you’re talking about a world that’s failing.

ekm got it right yesterday, as usual:

“What have I been telling, it's been months?

“Same batch of stocks are getting bounced between primary dealers.

 “Any point above SP 1000, retail is simply priced out. Primary Dealers have pushed up the price of S&P from 1000 to 1500 by simply rotating the same batch of stocks in the eternal hope of luring suckers.

“Again, suckers are priced out at 1000, unless, unless.........they can manage to plunder the pension plans (fonzanoon's idea).

“However, I do not think there's enough saved money to be suckered into. That would require the implicit cooperation of pension fund managers and I don't think anybody would be so stupid as to fall for that.”

Wed, 02/20/2013 - 21:23 | Link to Comment prains
prains's picture

This is the epitome of the dumb money follows dumb money principle.

 

it's the real american way willie B

Wed, 02/20/2013 - 20:48 | Link to Comment SillySalesmanQu...
SillySalesmanQuestion's picture

Uhhh, is this Friday afternoon humor....?

Wed, 02/20/2013 - 21:32 | Link to Comment ebworthen
ebworthen's picture

There must be an AIG booster or three haunting this post.

Saw a bunch of those pricks wasting taxpayer money at a ski resort this Winter.

What a waste of humanity, the fucking shills; a cloister of parasites, leeches, and societal tapeworms.

Other than that they were probably pretty decent fellows, in their Mother's eyes.

Wed, 02/20/2013 - 21:40 | Link to Comment MachineMan
MachineMan's picture

Ain't It Good

Wed, 02/20/2013 - 21:50 | Link to Comment darteaus
darteaus's picture

Ain't It Gone?

Wed, 02/20/2013 - 21:44 | Link to Comment Chris88
Chris88's picture

A hedge fund I used to work at that knows the ins and outs of financial services better than any other, purchased a ton of AIG last quarter.  I would definitely not be on the other side of the trade given their track record.

Thu, 02/21/2013 - 00:16 | Link to Comment Clowns on Acid
Clowns on Acid's picture

Yeh, AIG has made the same moves as the big banks. Let the Fed buy all the bullshiite assets (MBS / securitized crap) off the balance sheets and match the liabilities with USTs and UST swaps.

The big banks and insurance companies have shifted their risk onto the Fed's balance sheet. I think that some of the hedge funds have figured this out.

The liquidity crisis of 2007 will not be repeated. Equiites will go down further...but the banks liquidity / exposure to the shadow banking  structures are not there like in 2007.

Future default rates on credit cards, car loans, mortgages, etc ...might get a lot worse and threaten the banks again...but that is down the road a piece.

Wed, 02/20/2013 - 21:49 | Link to Comment darteaus
darteaus's picture

Talk about not learning from one's mistakes....

Wed, 02/20/2013 - 23:40 | Link to Comment tooktheredpill
tooktheredpill's picture

surely its a typo somewhere and they are all short. does Cassano still work there? short whatever company he is working for.

Thu, 02/21/2013 - 01:09 | Link to Comment Grand Supercycle
Grand Supercycle's picture

AAPL Parabolic Irrational Exuberance. . .

As mentioned in 2012 vertical moves for any stock,commodity etc are unsustainable.
Charts don't lie.

AAPL monthly chart as of February 5, 2012 & posted February 10, 2012.
http://trader618.com/2012/02/10/aapl-parabolic-irrational-exuberance

AAPL monthly chart as of April 4, 2012 & posted April 9, 2012.
http://trader618.com/2012/04/09/aapl-parabolic-irrational-exuberance-2

Thu, 02/21/2013 - 02:42 | Link to Comment q99x2
q99x2's picture

AIG is the symbol of Financial Fraud. What the heck that's what the world is run on. None better than AIG to funnel workers money through. It works if you work it.

Thu, 02/21/2013 - 10:17 | Link to Comment Shizzmoney
Shizzmoney's picture

It will be great if the govt had to bailout AIG AGAIN......

It won't need to bailout Google, which is already a quasi-government agency, and a sub-division of the NSA.....

Thu, 02/21/2013 - 11:06 | Link to Comment moneybots
moneybots's picture

"and where any future growth will depend solely on pulling incremental dumb money in"

 

Here it comes- i just heard this morning that some analyst placed a $1,000 price target on GOOG.

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