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Dash For Absolute Trash Outperforms Everything In 2013

Tyler Durden's picture





 

Worried about potential bankruptcy next week, buy the stock. Concerned at slumping top- and bottom-line misses, buy the stock. Regulatory oversight, buy the stock. Over-leveraged, buy the stock. Fortress-like balance sheet, not so much... Since the mid-November lows at the start of this liquidity-fueled rally de luxe, the most-shorted names in the Russell 2000 have risen an impressive 27% - even more impressive is that this is a 1150bps outperformance over the index itself. As we warned a few times, the list of most-shorted stocks is often a place to find epic (and ridiculous) returns but with our macro hats on for one second, if this kind of 'capital' is flooding into these kinds of companies - we can only imagine the landscape of mal-investment that will be exposed if and when the tide ever ebbs even modestly. For now, the dash-for-trash continues - though today is the first 2-day drop in 3 weeks (but still outperforming the not-most-shorted names).

Since the November lows, the 'trash' has outperformed 27% vs 15.5%...

 

and it seems the liftathon to new highs was 'engineered' through the 'most-shorted' names also... YTD, the most-shorted names have outperformed by 400bps!! (+13.2% vs +9.2%)

 

Charts: Bloomberg

 


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Wed, 03/13/2013 - 11:46 | Link to Comment Gamma735
Gamma735's picture

Too much floating money out there is trying to find a real return.

Wed, 03/13/2013 - 11:50 | Link to Comment Abraxas
Abraxas's picture

And, the gold is down??? Bizarro world.

Wed, 03/13/2013 - 11:56 | Link to Comment camaro68ss
camaro68ss's picture

gold down = a quicker shortage coming. shortage = gold up

Wed, 03/13/2013 - 12:10 | Link to Comment MillionDollarBonus_
MillionDollarBonus_'s picture

I bet some of the doomer ZH day traders have secret trading losses so big that they would never dare tell their wives and children. Instead, they sit all day in their pajamas screaming about 'manipulation' and ranting on ZH. Simply disgraceful.

Wed, 03/13/2013 - 12:15 | Link to Comment camaro68ss
camaro68ss's picture

The only one i can see sitting in there mothers basement treating via E-trade baby is you MDB.

All the lights are flasing red and your a BUY BUY BUY

Wed, 03/13/2013 - 12:23 | Link to Comment tarsubil
tarsubil's picture

Hey! I'm wearing jeans! And I will never lose with my physical because it requires selling to realize the losses.

Thu, 03/14/2013 - 01:05 | Link to Comment mkhs
mkhs's picture

Jeans, pajamas, bunch of wussies. 

Wed, 03/13/2013 - 12:26 | Link to Comment Abraxas
Abraxas's picture

MDB, your sense of humor is keen, but sick and cruel. I almost like it. What do you gain from posting here though, beats me.

Wed, 03/13/2013 - 12:34 | Link to Comment long-shorty
long-shorty's picture

MDB, I never grow tired of your satire or the people who think you are expressing sincere opinions.

Wed, 03/13/2013 - 12:07 | Link to Comment SheepDog-One
SheepDog-One's picture

All of em except a few central banksters are going to get their brains monkey stomped one of these mornings.

Wed, 03/13/2013 - 12:11 | Link to Comment camaro68ss
camaro68ss's picture

Im waiting for the headline, " FED's printing press down for repairs, markets crash 10%"

Wed, 03/13/2013 - 13:14 | Link to Comment Groundhog Day
Groundhog Day's picture

Kevin henry and simon potter are really good at their jobs.  With very little money they sell the vix to rally the s&p 500, buy the shorted russell stocks to rally the russell 2000, and now buy the Dow transportation index on a daily basis to drive the DOW.  Brilliant.  1-3 billion a day keeps the bears away.  At this pace 1600, 15000, and 1000 is just a month away

Wed, 03/13/2013 - 11:46 | Link to Comment TrumpXVI
TrumpXVI's picture

That's fuckin' brutal.

Wed, 03/13/2013 - 11:49 | Link to Comment Dr. Engali
Dr. Engali's picture

The fact that there are any shorts left in this market amazes me. The "proffessional" money managers should just write the fed a check and cut out the middle man.

Wed, 03/13/2013 - 11:53 | Link to Comment Bryan
Bryan's picture

Believe it or not, I have been stupidly short this market via a SDS position since May 2009.  Still holding -- because I refuse to drink the Koolaid.  Give me liberty, or give me the poorhouse!

Wed, 03/13/2013 - 12:07 | Link to Comment busted by the b...
busted by the bailout's picture

If we still had poorhouses instead of free money, Section 8, food stamps, welfare, medicaid, etc., you would have made a profit, as would I have. 

Unfortunately, they pulled out ALL the stops this time and changed the game completely. 

It reminds me of something Richard Ney said many years ago, "When you figure out the key to the market, some jerk changes the lock!" 

In this case they did more than change the lock, they rigged the entire market, and reasoned investing will no longer work until free-market reality is allowed to return, if ever. 

Until then, you either play along or suffer greatly, imo.

Wed, 03/13/2013 - 12:12 | Link to Comment Bryan
Bryan's picture

Yes, you are right.  I was expecting maybe at least a double-bottom by the Fall of 2009 before the market would slowly claw back upward.  I had no idea that the Fed would come in with a cannon and just blast the market to the moon.  Oh well... live and learn... the only problem is, you don't live long enough to apply the lessons you learned to the next situation!  :-)

 

I still refuse to close my SDS position on the grounds of morality and decent human behavior!  hehe

Wed, 03/13/2013 - 12:20 | Link to Comment SheepDog-One
SheepDog-One's picture

I can't believe that there are still shorts to just line up day after day to get kicked square in the nuts....just can't believe it!

Wed, 03/13/2013 - 12:24 | Link to Comment Dr. Engali
Dr. Engali's picture

I can't either.

Wed, 03/13/2013 - 13:26 | Link to Comment GolfHatesMe
GolfHatesMe's picture

Insurance companies do not believe in physical, and will use these to hedge.  Quite intelligent /sarc

Wed, 03/13/2013 - 11:55 | Link to Comment BlueStreet
BlueStreet's picture

Too bad for Ackman they aren't dashing for the trash that is JCP.  

Wed, 03/13/2013 - 11:57 | Link to Comment camaro68ss
camaro68ss's picture

one mans trash is another mans..... o F*** it, pass me another drink.

Wed, 03/13/2013 - 11:57 | Link to Comment DOT
DOT's picture

BTFT !

Wed, 03/13/2013 - 11:58 | Link to Comment NEOSERF
NEOSERF's picture

I could guarantee you the moment I made that dash, the market would turn...

Wed, 03/13/2013 - 12:00 | Link to Comment PAWNMAN
PAWNMAN's picture

One traders trash is another traders treasure. The unreality continues in earnest.

Wed, 03/13/2013 - 12:06 | Link to Comment SheepDog-One
SheepDog-One's picture

Dow down -10....this must be the 'Big Correction'...then we're off to the races to 15,000 by Friday close!

Wed, 03/13/2013 - 12:18 | Link to Comment SheepDog-One
SheepDog-One's picture

One of these days, someone is going to call the FED's bluff and reveal all they're holding is a pair of 2's....one of these days...

Wed, 03/13/2013 - 12:26 | Link to Comment orangegeek
orangegeek's picture

Dow Jones daily is in a vertical ascent.

 

http://bullandbearmash.com/chart/dow-jones-daily-climbs-record-high-48-m...

 

Not sure what the "invest now commotion" is all about.  But while the market rockets in price, the volume remain anemic.

Wed, 03/13/2013 - 12:27 | Link to Comment master of the mews
master of the mews's picture

Short positions can be a result of Hypothecation

A margin account is a type of brokerage account that allows you to take out loans against securities you own (sometimes called a "Type 2" account). Because the brokerage house is essentially granting you credit by giving you a margin account, you must pass their screening procedure to get one.  Once you have a “margin” account you can purchase additional securities up to the value of the original deposits to the account.  (The discussion of “maintenance requirements” is more complicated.  No need to discuss that here.)

To the extent you have a “debit” in your margin account the broker can lend your securities to offset their need to borrow money to cover your debit balance. This key feature of the margin account agreement is called the "hypothecation and re-hypothecation" clause. This clause allows the broker to lend out your securities at will. So the ability to borrow money always comes with the trade-off that the broker can lend out ("hypothecate") securities that you hold to short-sellers. Although you will pay the brokerage when you borrow money from them, the brokerage house will *not* pay you (or in fact even notify you) if they borrow your shares.

What is even more interesting is that the broker can “loan” the shares to itself.  They then can sell the stock short – and collect interest on the credit balance resulting for the sale.  They then use the expected proceeds from the interest earnings to buy calls to cover the short sales.  If the stock goes up they break even.  If the stock goes down they clean up. 

So……. When you see huge short positions on any stock, remember, the short may not be a directional bet, instead, it may be a risk/reward play by your broker where the risk is zero and the rewards can be significant.

Wed, 03/13/2013 - 12:27 | Link to Comment polo007
polo007's picture

http://finance.yahoo.com/blogs/daily-ticker/stock-market-debt-fueled-bubble-steve-keen-121950839.html

To point out the very obvious, it’s not likely to continue forever. But according to economist and author of the book Debunking Economics, Steve Keen, it stands to get much, much worse in the next one to two years.

Keen tells The Daily Ticker the U.S. stock market is a giant bubble. But the key factor inflating it may not be what you think, according to the economist (i.e. he’s not pointing fingers at the Fed…at least not directly).

Keen has his eye on margin debt. This is the money people borrow from their stockbrokers to expand their holdings of shares. Keen says the ratio is now 70%, meaning with $300,000 you can borrow $1 million worth of shares.

Here’s where it gets interesting. Steve has found a relationship between the change in margin debt and the level of asset prices. Even more importantly, he points to a correlation between the acceleration in margin debt and the rise in asset prices.

If his theory holds true, this means we’re relying on the acceleration of margin debt to drive rising share prices. And when that acceleration slows down, equity prices will fall.

Wed, 03/13/2013 - 14:07 | Link to Comment tenpanhandle
tenpanhandle's picture

I have a theory also:  When the market falls it will go down.

Wed, 03/13/2013 - 12:42 | Link to Comment digalert
digalert's picture

After reading the mofo's POMO mojo schedule and how the markets levethon seem to coincide, here in ZH. I changed my positions into IMW calls and been quite successful...until the POMO mojo runs out.

Wed, 03/13/2013 - 13:38 | Link to Comment El Hosel
El Hosel's picture

Your Tax dollars hard at work, the Team is getting the most bang for their Market Rigging buck and at the same time bitch slapping those that dare take the other side. It looks like the names that sold of the most on the Feb 14 big down day recovered the most, makes sense as those would have appeared to be the weakest and most attractive to short at the time... EIX, VLO,TSO,IP,WMT,HD,EXP  a few good examples.

Wed, 03/13/2013 - 14:31 | Link to Comment lbrecken
lbrecken's picture

Speak for yourself BIOLASE..BIOL is not trash...best turn around in many a year....even though its not index but is heavily shorted up 100% on year.

Wed, 03/13/2013 - 14:43 | Link to Comment ZeroFreedom
ZeroFreedom's picture

Is the trade still on?

Is there an ETF for this?

Wed, 03/13/2013 - 15:07 | Link to Comment Mediocritas
Mediocritas's picture

It's not zero hedge, it's invert hedge. Short blue chip, long junk. Profit.

Anyone still trying to run a hedge fund is an idiot. The smart guys gave it up years ago.

Just subscribe to shortsqueeze.com and forget about any kind of fundamental analysis. / s

Do NOT follow this link or you will be banned from the site!