The Other Great Rotation - From Reach-For-Yield To Dash-For-Trash

Tyler Durden's picture

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...


Charts: Bloomberg

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RaymondKHessel's picture

<--- amazon coins

<--- bit coins

insanelysane's picture

Even the MSM financial networks seem to be getting sick of saying new highs.

King_of_simpletons's picture

Great Rotation, Great Recession, Great Depression... all great names.

insanelysane's picture

When the Great Crash happens, I expect the POTUS to come out and say something like, "I found out there was a guy named Ben Bernanke and an institution named the FED that caused this crash just like everyone else, on today's news."

ACP's picture

Look at this bullshit perfectly symmetrical formation in the S&P today. What a load of garbage.

Looks like a giant middle finger the HFTs/banker criminal scum are pointing at the incompetent retards at the SEC.

"Hey, fuck you John Public and the SEC. I can do whatever I want and there's not a damn thing you can do about it."

Atlasshruggedme's picture

Yes, it boggles my mind also. Sure ride the wave, but with un-employment still in the trash. Debt to GDP and many other factors, there is no other reason for the increase other then Savings accounts payout .00001 interest and the common Joe figure the risk is worth the gains.

chunkylover42's picture

The R^2 of the Yen against the dollar and the S&P since November 15 is 0.94.

Does that answer your question?

Jayda1850's picture

depends if I have to pay internet sales tax on the amazon coins. But I seriously have a hard time telling the difference between bitcoins, amazon coins and buying WOW gold and zynga coins to play there apps. I guess everybody wants to be a central banker.

alien-IQ's picture

the never ending "short-covering" meme...

Temporalist's picture

I don't know which I prefer; short covering, money on the sidelines, gold bear market, many to choose from.

JJ McApe's picture

you get the Zimbabwe ben seal of approval soon.



algol_dog's picture

Funny isn't it .... Cohn says, stocks are cheap at S&P 1660. At S&P 666 they were expensive, I suppose ....

firstdivision's picture

This entire market is driven on a short covering rally every day.  I'm still amazed that people try to short this shitshow.  Just cash out and move your money to physical assets if you want to short equities.  Then they cannot force you to cover.

LawsofPhysics's picture

Correct, turn those paper promises into physical assets and wealth while you can.

Headbanger's picture

It's starting to look like we could have a key reversal day in the making

Could Eric Holder be the long awaited black swan?

Headbanger's picture


Oh!   I shouldn't call him a swan!

My bad.

Panafrican Funktron Robot's picture

Has a negative connotation with fried bird meat and consumption of fermented grain beverages enveloped in brown paper bags.

Damn, this new posting policy seems to be having precisely the opposite effect as intended.

Panafrican Funktron Robot's picture

5.5 billion in POMO tomorrowing heading into opex.  You tell me whether that sounds like a reversal day.

fonzannoon's picture

There is no one shorting this market. If anyone on here is shorting it you are just suicidal with a born to lose tattoo on your ass.

Dr. Engali's picture

I would like to know who the idiots are that can be seperated from their money with such ease by trying to short this thing. Just write a fucking check to the squid and cut out the middle man. Or better yet write it to me and I'll spend it on better things than pussy and blow..... Well I might spend some on the former. I have to keep the Mrs. Happy.

phalfa5's picture

ummm  don't u mean the latter there doc?


Dr. Engali's picture

If the Mrs. Finds out I have money and don't spend any on her, I'm not getting any pussy.

ghostfaceinvestah's picture

Definitely a trash rally.

Pareto's picture

VIX compression bitchezzzzzz!

Mark123's picture

Why short any stock, or index in this rigged market?  It is also foolish to use stops....all you are doing is letting the big boys scalp your money.  They own the system, and know what you are doing in aggregate - too easy for them.


If you really want to short the market, just stay in cash and wait for better prices.  I hate to think how much money has been stolen from people using inverse ETFs (e.g. SH). 


Nothing makes printing has gone parabolic, and gold (paper) is crushed dragging the real price lower too.  Maybe the best short is to buy gold/silver miners?  However...I would have said the same thing a year ago!


Bloody crooks.  Printing trillions in new money and buying crap from each other.

Smuckers's picture

I'm waiting for "sprint to the mint", but I'm already at the finish line.


polo007's picture

Instead of firing a shot, the Fed has decided to use smoke signals. The first was the May 8 remark by Dallas Fed president Richard Fisher. The second — and more important — was Jon Hilsenrath's report in the Wall Street Journal which hit after market close last Friday. Mr. Hilsenrath reported that the Federal Reserve has been working on a strategy to taper back its quantitative easing program. Mr. Hilsenrath is widely viewed as being the Fed's mouthpiece, so it's quite likely that this second smoke signal was carefully timed to give investors an opportunity to process the information, to find out what is and is not true about what the Fed has planned, and finally, get used to the idea of life without quantitative easing. Through this carefully-orchestrated series of events, Dr. Bernanke was able to turn the blame game into the end game.

As luck would have it, the first trading day after Jon Hilsenrath's article brought a surprising report on April retail sales from the Commerce Department. The report disclosed that retail sales had unexpectedly increased by 0.1% in April, despite economists' expectations of a 0.3% decline. Not only was there some good news to offset Hilsenrath's bad news, but the Commerce Department report sent a ray of hope to those who were ready to accept Richard Fisher's contention that the Fed could claim "mission accomplished" and that it was finally time to do so.

What happens from here is anyone's guess. It's like Warren Buffet's "good movie" analogy — we don't know how it's going to end, so we need to watch closely.

However, so far this week, major U.S. markets have continued their non-stop melt up into overbought territory with yet another record day. A quick look at the chart of the S&P 500 shows the parabolic nature of this last upward move and the growing possibility of a blow-off top.

The S&P 500 is now approximately 12% above its 200-day moving average, and a gap this large was last seen back in March of 2000, just before the dot-com crash. Will history repeat or only rhyme, or in Yogi Berra's famous words, will we see "déjà vu all over again"?

Stock indices cannot keep going up forever, contrary to what you may have been told by your favorite television stock market commentator, and with the S&P 500 now up nearly 13% year to date, the index is on track for annual gains in excess of 25%.

Perhaps Bill Gross is right with his Tuesday Tweet: "Never have investors reached so high in price for so low a return. Never have investors stooped so low for so much risk."

nomorebuyins's picture

Most shorted Russell 2k stocks are hard to borrow, when it get's to the point where you can not borrow stock to add to your short position, the fee to borrow these names goes up. Even if the fee or % remains the same, it is based on the notional value of your short position. The brokers and banks lending these out stand to make more when the shorts are getting crushed. Probably really easy to keep these names moving up.

slaughterer's picture


Have found it difficult to borrow soem of the shittier stocks that are blowing out right now.  

polo007's picture

Raising interest rates is never popular, but keeping rates low for too long builds in pervasive problems for the economy. Interest rates in nominal terms are at record low levels and negative in real terms, even though Canada’s GDP is only slightly below capacity. At the same time, there are symptoms of distortions created by low interest rates in financial markets: unfunded pensions, losses by insurance companies, excessive household debt, high house prices, and a bias toward high-yielding equities. Extremely low interest rates mean that the Bank of Canada has a long way to go before they approach a neutral setting. The time has come for the Bank to start raising interest rates gradually to lessen the continued build-up of financial imbalances.