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Short Squeeze Goes Parabolic

Tyler Durden's picture




 

The "most shorted" stocks have quadrupled the performance of the broad market this week as the dash-for-trash remains the best-performing strategy under the premise of an ever-rising strike Yellen put. The ammo for this latest rampapalooza, as we noted here, was hedge fund specs the 'shortest' in over a year which were then squeezed by an ever-present visible hand willing to sell JPY against any and everything in the world (or smash VIX - which ever works best). But as one more skeptical manager noted, "I’ve been a non-believer for so long that I just am not believing yet."

 

What's better than being long stocks? Being Long the "most shorted" stocks...!

 

It didn't take long for investors to full bulltard once again...

h/t @Not_Jim_Cramer


As Bloomberg notes,

Five years after the credit crisis, equity markets are showing zero tolerance for bears.

...

 

“If I were bearish, I’d be very concerned,” Doug Foreman, chief investment officer at Kayne Anderson Rudnick Investment Management in Los Angeles, said by phone. His firm oversees about $9 billion. “What’s it going to take for me to be right? I don’t know. There is no evidence that they’re going to be right any time soon.”

 

...

 

“What we’re seeing is a resilient economy and I’m afraid there’s been a reluctance on some people’s part to focus on the bigger picture,” Howard Ward, the chief investment officer for growth equity at Rye, New York-based Gamco Investors Inc., which oversees about $47 billion, said in a Feb. 25 phone interview. “There’s a lot of good news out there that has not been received.”

But there is still skepticism,

I’ve been a non-believer for so long that I just am not believing yet,” said Landesman, who helps oversee about $1.3 billion. “We’re going to see a very volatile year, with the potential of low 1,500s to the downside.”

 

...

 

“The rose-colored glasses being worn by investors might be cleared in the year ahead as the withdrawal from QE and low rates might be harsher than many expect,” Kass said. The Fed’s stimulus, known as quantitative easing, “doesn’t create a safe world, it creates a temporary high and the danger always comes on the flip side,” he said.

 

But perhaps it's deja vu?

 

As we concluded previously,

...every time even a modest threat of a downside correction reappears, momentum ignition across key FX carry pairs sends the Spoos and other equity indices higher triggering upside stops, which in turn forces even more hedge funds to cover short positions, once again sending the S&P too all time highs. And so on. Until the volume in the market is so low one block of E-mini futures sends the whole thing limit up, and everyone can just sit back and laugh.

 

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Wed, 02/26/2014 - 15:00 | 4481145 One And Only
One And Only's picture

How are Soros' puts working out?

BTFAH

Wed, 02/26/2014 - 15:17 | 4481244 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

These big time douche investors are all in and leveraged to the hilt. If they don't go bulltard they get the wrong end of a bull's cock and the chance to jump off a building.

Wed, 02/26/2014 - 15:18 | 4481251 thunderchief
thunderchief's picture

After they skewer and fry Soros these short positions will be so ripe.

I can't wait for new highs based on the worst economic numbers in history this spring summer.

I just can't wait!

Wed, 02/26/2014 - 18:40 | 4482312 pondview28
pondview28's picture

He is hedging. It is about 10% of his portfolio. Good investment strategy if you want protect a bazillion dollars. Crappy strategy if you are trying to make money overall.

Wed, 02/26/2014 - 15:01 | 4481148 DoChenRollingBearing
DoChenRollingBearing's picture

Going short is very dangerous for retail folks like us.  Only for the very connected or very rich.

Wed, 02/26/2014 - 15:06 | 4481171 James_Cole
James_Cole's picture

Safer than going long lol

Markets can remain irrational longer than you can remain solvent. 

Wed, 02/26/2014 - 15:08 | 4481196 qqqqtrader
qqqqtrader's picture

But that red arrow says we're going down, must be true because I saw it on the internet.

Wed, 02/26/2014 - 15:18 | 4481247 camaro68ss
camaro68ss's picture

I want to see more bankers attempt flying  

Wed, 02/26/2014 - 15:01 | 4481150 Dumpster Fire
Dumpster Fire's picture

We're off.  Again.

Wed, 02/26/2014 - 15:04 | 4481168 assistedliving
assistedliving's picture

I was sure it was 2011..

no way past 2012...

2013 it better be or...

2014 i'm broke

Wed, 02/26/2014 - 15:11 | 4481215 qqqqtrader
qqqqtrader's picture

2015

you'll have free Obamacare, a free phone and a SNAP card!

Wed, 02/26/2014 - 15:12 | 4481219 camaro68ss
camaro68ss's picture

2015 your obamaville camp gets raided by FEMA, you loose again

Wed, 02/26/2014 - 15:49 | 4481402 thunderchief
thunderchief's picture

2020 It's closer than you think.

Everything is free, you just never get out of line.

Wed, 02/26/2014 - 15:56 | 4481444 ms8172
ms8172's picture

You were just stupid.... Go long now and post back here in about a year.

You might be the one we read about jumping off a building with the bankers!

Wed, 02/26/2014 - 15:05 | 4481178 Cdad
Cdad's picture

All we need now...is for the Fed to cancel the taper.  At that moment in time, all "market" and "Federal Reserve Bank" credibility will plunge into negative integer land...and that will be that.

So you go, Janet!  Taper that taper and blow it all up....pretty please.

Wed, 02/26/2014 - 15:28 | 4481300 john39
john39's picture

what if they just resort to off the books QE.  It shouldn't be possible, but what really stops them?

Wed, 02/26/2014 - 15:37 | 4481334 Cdad
Cdad's picture

What really stops them?  The SEC and the DOJ....oh....wait....never mind. 

Wed, 02/26/2014 - 15:07 | 4481192 Dr. Engali
Dr. Engali's picture

People trying to short this market crack me up. They just don't get it. When this market does finally give up the ghost there won't be anybody left to capitalize. They will all be Mt. Goxed.

Wed, 02/26/2014 - 15:09 | 4481203 El Hosel
El Hosel's picture

No shit, this looks like it could be  the big one. Only a hop skip and one big red candle from a major asswhooping for the Bullls.

Wed, 02/26/2014 - 15:13 | 4481228 RSloane
RSloane's picture

"If I were bearish, I would be very concerned." has to be the understatement of the last five years. I agree Doc. If you know something is going to be supported at all cost, whatever the cost, then why would you bet on its demise?

Wed, 02/26/2014 - 15:20 | 4481237 Dr. Engali
Dr. Engali's picture

I don't know, it's almost as if they wanted to be parted from their capital..... oh wait, it's not their capital. Maybe that explains it.

Wed, 02/26/2014 - 15:23 | 4481279 RSloane
RSloane's picture

I think you might have stumbled onto something Doc. ;)

Wed, 02/26/2014 - 15:34 | 4481324 qqqqtrader
qqqqtrader's picture

Time to double-down?

do this 7 times and you too can become a millionaire!

Wed, 02/26/2014 - 15:22 | 4481272 firstdivision
firstdivision's picture

Actually if you were to short at the pinnacle and the shit storm hits, at least you won't have to worry about covering.

Wed, 02/26/2014 - 15:26 | 4481294 Dr. Engali
Dr. Engali's picture

Other than bragging rights good does it do you? If you can't cover then there is no profit. 

Wed, 02/26/2014 - 15:09 | 4481204 Hindenburg...Oh Man
Hindenburg...Oh Man's picture

I wish that someone was shorting the miners and gold so they'd go up.....In any case... I don't short anymore.....that's for damn sure. And seeing the NASDAQ up like 12 out of the last 13 days reassures me that my call to no longer short is a good one. 

Wed, 02/26/2014 - 15:11 | 4481213 FieldingMellish
FieldingMellish's picture

Yeah... it seems short only works for one asset class.

Wed, 02/26/2014 - 15:11 | 4481205 FieldingMellish
FieldingMellish's picture

All this accumulated "wealth" will disappear in less than a second when the algos go berserk and the brokerage houses do a MTGox. Aaannddd.... it's gone!

Wed, 02/26/2014 - 15:15 | 4481233 thismarketisrigged
thismarketisrigged's picture

 

...

 

“If I were bearish, I’d be very concerned,” Doug Foreman, chief investment officer at Kayne Anderson Rudnick Investment Management in Los Angeles, said by phone. His firm oversees about $9 billion. “What’s it going to take for me to be right? I don’t know. There is no evidence that they’re going to be right any time soon.”

 

...

 

“What we’re seeing is a resilient economy and I’m afraid there’s been a reluctance on some people’s part to focus on the bigger picture,” Howard Ward, the chief investment officer for growth equity at Rye, New York-based Gamco Investors Inc., which oversees about $47 billion, said in a Feb. 25 phone interview. “There’s a lot of good news out there that has not been received.

 

 

the bolded part is hilarious, still laughing

 

 


Wed, 02/26/2014 - 15:17 | 4481239 forwardho
forwardho's picture

Tylers, Thank you so very, very much.

On a lark, I followed your hypothesis.

By far the most profitable trade this YTD!

 

Wed, 02/26/2014 - 15:31 | 4481245 LawsofPhysics
LawsofPhysics's picture

Well that's dissappointing.  As it turns out humans are not that smart.

< shocker >

Wed, 02/26/2014 - 15:19 | 4481258 firstdivision
firstdivision's picture

Time to short the 'most shorted'.

Wed, 02/26/2014 - 15:20 | 4481262 gjp
gjp's picture

What a madhouse.  Granted it's been a madhouse for two decades running now, but FB going up after buying What'sApp, TSLA surging due to broker notes about 'utopian dreams' and promises to build a 'gigafactory' in something outside of its core expertise, while another Elon Musk even bigger scam, SCTY trades at 18 times 2016 revenue, bigger market cap than any other solar player, they don't make anything, and don't do the installs either ... it's all so corrupt and juvenile at the same time ... and then they quote someone who would be worried if they were a bear??

We should all be worried, and about more than market prices.

Wed, 02/26/2014 - 16:31 | 4481630 stockoperator
stockoperator's picture

You forgot NFLX. Stock shoots after their deal with ISPs.

Wed, 02/26/2014 - 15:30 | 4481308 steelhead23
steelhead23's picture

I so wish Bernanke were still around.  Then the title for this post would have been:  Ben Spoos all Over the Spoos.  The connection between FX volatility and the need to short cover is not crystal clear to me, but the inverse logic of the markets (bad economic news - lead markets higher) is apparent for all to see.  Is it too early to say the markets are broken?  Or, are they merely irrational?

Wed, 02/26/2014 - 15:37 | 4481336 Spungo
Spungo's picture

"Going short is very dangerous for retail folks like us.  Only for the very connected or very rich."

You can make safe short bets if you stick with companies that are pretty much doomed to fail. I think GM would be one of those companies, but I would need to see a very bad quarter before pulling the trigger. I'm not sure about when, but eventually it will crash. I think Tesla would be a great short opportunity at some point, but I don't know when. Even if Tesla does not go bankrupt, the stock price will need to crash down to reality at some point.

 

Wed, 02/26/2014 - 15:55 | 4481434 DoChenRollingBearing
DoChenRollingBearing's picture

Timing was also a problem for me.  So, I don't "trade" anymore, I just lost money doing it, so I don't anymore.

Wed, 02/26/2014 - 15:39 | 4481339 curbyourrisk
curbyourrisk's picture

"Five years after the credit crisis, THE FED is showing zero tolerance for bears."

 

Fixed it for you!

Wed, 02/26/2014 - 15:48 | 4481397 adr
adr's picture

The economy as presented by Wall Street has always been a mirage. But a mirage is based on something believable, it looks real. In the 1990s the wealth effect looked real, homes were appreciating, salaries were going up, and life was generally good.

After the 2000 crash everything changed. Organic growth was dead, only the illusion of growth remained. Commodities skyrocketed in price, making it look like there was growth, paper prices for homes went full retard making people think they could afford things way outside the budget of their crappy job.

Now we only have the stock market increasing in value. Everything else is cratering. It's not a mirage of an economy anymore, it is a full blown fantasy.

I don't know if anyone else saw The Lego Movie here, I have a five year old, but the movie had the greatest representation ever of what I believe Wall Street sees, Cloud Cuckoo Land.

Imagine Unikitty as Janet Yellen:

http://www.youtube.com/watch?v=Z-LzY5SUsKw

Wed, 02/26/2014 - 15:53 | 4481422 delivered
delivered's picture

Nervous going long but scared to death going short/bearish. All market/business fundamentals have been replaced by one simple policy change - QE! The importance of cash flow, IRR's, time value of money, real GAAP based financial statements, etc. have all been replaced by CBs continued efforts to print, support, inflate, and bailout every market or TBTF, or even the TSTCs now (too small to care) as even China has been sucked into this game by bailing out some small trusts over the past 30 days. 

Still a believer that fundamentals will reign one day but watching the shorts get creamed on a daily basis is testing my resolve. Starting to think we may be entering an entirely new world of financial/accounting/economic theory where old school fundamentals (as previously noted) are all replaced by one new MBA class - Understanding QE and How to Front Run the Fed. Nothing else really seems to matter these days.

Wed, 02/26/2014 - 15:54 | 4481429 Save_America1st
Save_America1st's picture

and how's 'ol Hugh Hendry doing these days? 

Wed, 02/26/2014 - 15:56 | 4481441 Caracalla
Caracalla's picture

While I'm bullish on stocks in general, I think there's some money to be made in the short term shorting some of these stocks.  I bought puts on TWTR, FB and TSLA today and I expect to make a pile of money off them as they retrace some of the terrific run up they have had.

Wed, 02/26/2014 - 16:32 | 4481646 B.J. Worthy
B.J. Worthy's picture

Fannie and Freddie are up almost 50% YTD.

The WTF is strong with these ones.

Wed, 02/26/2014 - 17:11 | 4481914 TheRideNeverEnds
TheRideNeverEnds's picture

Buy the motherfucking dip bitches! 

 

I wonder how many points we will be up tomorrow after yellen announces an increase in QE?  I am thinking we may go limit up so that would be what, 100 points or so up in the ES?

 

We will be up at least 50-60 points on whatever she says, straight to 1900.

 

Up less than 20 would be a huge disappointment and the probability that we close down on the week is zero. 

Wed, 02/26/2014 - 22:23 | 4483129 myztix
myztix's picture

with CLF being the exception.

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