The Other Great Rotation - From Reach-For-Yield To Dash-For-Trash
It appears that the only thing driving this market higher now is shorts covering. The 'most shorted' names (as we first suggested here) have tripled the performance of the market in the last 4 days (+5.2%). Simply put, this is not a reach-for-yield anymore (which is somehow pitched as a reasonable conservative 'ah shucks' thesis to be buying stocks), this is a dash-for-trash (at a time when financing for this trash is actually blowing higher) - and that always ends well...
Are we surprised? Not at all... as we said 8 months ago...
Are we saying this will happen, or any one company will perform as suggested? Of course not: we are not Cramer.
This is simply the math.
And since fundamentals don't matter in a world where Austrian monetary theory rules (i.e., the only thing that matters is the amount of liquidity entering or leaving the market at any moment), taking advantage of people who still naively believe that there are traces of rationality and efficiency in a market that is broken beyond any slavage value and short the worst names out there, may be one of the few "strategies" that work, besides of course predicting with 100% accuracy what side of the bed Mario or Ben will wake up on.
Last 4 days... (Shorts +5.2% vs Russell +1.8%)
Last month... (Shorts +14.8% vs Russell +7.9%)
Last six months... (Shorts +40.6% vs Russell +22.4%)
It seems the world is a little less excited about the rally as protection is heavily bid as shorts cover into this melt-up...
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