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The Broken Market Chronicles: For The Third Year In A Row, The "Most Shorted Names" Generate The Highest Return
Earlier, we showed that for the record 6th year (!) in a row, the average hedge fund will not only underperform the wealth effect policy tool better known as the S&P 500, but will, for the first time since 2011, generate a negative return for the year.
Why? The answer once again takes us to the fundamental problem with central-planning: broken markets unlike anything seen in history. It is shown on the chart below, where we see the average hedge fund generated a negative 1% YTD return (and 0 on the "and 20" portion of PM comp), which in terms of strategies, is only surpassed by the nearly 5% drop in event-driven strats, and the nearly 10% tumble in the EURUSD.
What about the other end? Well, with the S&P in third position of all actively-managed strategies (because the S&P is actively managed by the Fed, the ECB, the BOE, the BOJ and now the PBOC), there are only two strategies that according to Goldman, have outperformed the broader market:
- a basket full of Goldman's Hedge Fund VIP stocks, and paradoxically, just above it...
- a basket of the stocks that most hedge funds love to short.
That's right: for the 3rd year in a row, the best performing, highest-alpha strategy is to go short the most hated names and just sit back and collect those performance fees, because when nothing makes sense, the worst shall be the first.
Incidentally, this is precisely what we said not only in September 2013 in "Presenting The Best Trading Strategy Over The Past Year: Why Buying The Most Hated Names Continues To Generate "Alpha" but also the year before that when in September 2012 we said:
...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.
None of which will stop those who have the attention span of a Princeton or MIT gnat of accusing Zero Hedge of being an endless doom and gloom permabear, when in reality we merely find constant delight in pointing out just how broken this joke of a market has been for the past 6 years, and certainly allowing those habitual gamblers, who are so inclined, to profit from said farce (we suggest using other taxpayer's money for best effect).
It is for their benefit that we once again present the basket of most shorted names: go long these and as long as central planning is in control, one is virtually guaranteed to outperform the vast majority of hedge funds.
And as usual, a word of caution: in a market as broken as this, one's paper gains can and ultimately well be gone in the blink of an eye, especially once all exchanges do the "oops, we are broken indefinitely" play and make withdrawing one's funds impossible (i.e., a shareholder bail-in). One can be absolutely certain that this will happen just as the central bankers finally start to lose control over the ludicrous bizarro circus they have all created in their all-in attempt to recreate the USSR, only this time on a global scale (for more read How The Market Is Like CYNK)
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We shorted some folks
Exactly. "Right out of the textbook" actually. The short seller cannot clear the trade...stuck holding the position as "everything but their gold" goes parabolic.
That can force a "short sale" of actual physical gold I might because the theory that there is unlimited borrowing authority when you're sitting on a pile of the dirt lump is just that...a theory.
As a lot of Italians found out "trying to escape with your gold" is a dangerous business. The smart money keeps a ton of cash on hand. Very interesting that Apple can borrow a fortune in euro's.
You and I down here in the cheap seats do not have that option.
I would argue and indeed have that "all debt is not created equal" however. When you have a huge explosion in liquidity as we have here in the USA the Fed in my view is in fact quite limited in making all debt "not junk."
Oil markets have been slaughtered. Next up: junk bonds in my view.
That truly is a trillion dollar if not ten trillion dollar market.
These phuckers wanna play he long game? I say no problem.
"When you have a huge explosion in liquidity as we have here in the USA the Fed in my view is in fact quite limited in making all debt "not junk."
yep
back in september the OCC warned on subprime auto loans (and other loans) turning sour OUTSIDE the banking sector.
sure, the FR can/will bail out the banks ... but i don't see how they can bail out the shadow banking system
I believe that was TARP, TALF, PPIP ,etc.
"As the World Burns" - what a friggin' soap opera of a market and economy.
Thank God that was a short article.
yes "go short the most hated names" and lose your ass?
How about TLT and DIA each being up half a percent? This is the 3rd or 4th day bonds and stocks move together. No way they could possibly fall together... right? Amirite, comrades?
if it means retail gets hosed ... it can happen
"because when nothing makes sense, the worst shall be the first."
i'll take 3 bumperstickers
thanks
snort coke-buy bullshit stocks-get bonus
simple really
This is a 'pass the time' article. I can feel a biggy coming though. Nothing greyed out at the top as if in preparation for something collosal. I'm going to keep refreshing the home screen and wait for it.
You can fool all the people all the time.
Just not for ALL time.
Great qualification to paraphrase that classic quote!
Wait . . . we have moved onto the most hated large caps? This is just a list of the largest companies in the universe. What happened to using the most shorted Russell names?
Not that buying these companies is a bad idea. I assume that after 20 more years of 0% interest rates, a handful of these companies will buy/own all the rest of the world's companies.
as usual, the banksters don't include long-term treasuries in the rankings - they would be first.
talking about "broken markets", today we see Brazil ETFs up 7% intraday. the other day, Best Buy was up 7%+. A few weeks back, Delta Airlines was up 5%+ intraday.
on october 15th, long term treasuries were up 5-7% intraday. what do the banks do? (perhaps on advice from the NY FED). they shut the electronic platform off, erasing all gains.
in summary, stocks are allowed to explode higher intraday, treasuries are not. and so decided the dudley.
Before this ends we are going to have a generation of ANALysts who will not know valuation or price discovery.
Right now they could be replaced by an index or a spreadsheet.
"The fundamental problem with central-planning" is that system developed due to the successful application of the methods of organized crime to the political processes, in order to make and maintain the MAD Money As Debt system, where privately controlled banks get to make the public "money" supply out of nothing as debts, which fraud is enforced by governments, whose control was previously captured through the persistent application of those methods of bribery, intimidation, as well as assassination of those who could not otherwise be bribed or intimidated.
Furthermore, as the success of those systems of applying the methods of organized crime to the political processes increased, the profits from that fraud were available to be reinvested in more frauds, achieved by being able to dominate the funding of the foundations directing the development of the public education systems, as well as effectively take control over the mass media. All in all, "the fundamental problem with central-planning" is that was the result of the triumphs of the best organized gangs of criminals, who were able to capture control over the powers of governments, in ways which became runaways, growing at an exponential rate, while the only successful, surviving politicians became the puppets of that system, while the majority of voters became muppets, manipulated by that system.
On a deeper level, the problem with those who propose bogus "solutions" to the runaway central planning, based on privately controlled banks being able to control the public "money" actually being the triumph of organized crime, is that most people who propose those sorts of bogus "solutions" continue to think using false fundamental dichotomies, and therefore, continue to base their "solutions" upon the impossible ideals that people who perceive using those false fundamental dichotomies are able to continue to believe in.
More realistic resolutions of the problems that the established debt slavery systems grew at an exponential rate, inherently made both possible and necessary by their structure, to generate numbers which become debt insanities, are theoretically possible, but practically impossible. By and large, it is ridiculously too little, too late, to propose the impossible ideals of "returning to free markets," or whatever other superficial notions may be presented regarding the real ways that the existing central planning was the triumph of organized crime controlling civilization.
While I enjoyed the wry humour expressed in the article above, such as in the statements: "when nothing makes sense, the worst shall be the first" or "the central bankers finally start to lose control over the ludicrous bizarro circus they have all created" & "pointing out just how broken this joke of a market has been for the past 6 years ..."
MY POINT is that has NOT merely happened during "the past 6 years," but has been increasing at an exponential rate through the whole history of Neolithic Civilization, which was the development of human slavery systems to become more sophisticated. That our political economy is based on ENFORCED FRAUDS has always been the case, as most obviously so within the USA for more than a Century. The only thing that changes is that the EXPONENTIAL GROWTH of the consequences of controlling civilization through systems of lies backed by violence becomes more blatantly obvious!
The basic social facts were ALWAYS that governments were the biggest form of organized crime, controlled by the best organized gangs of criminals. In the history of America, that has primarily been about how the international bankers, as the best gangsters, were those banksters that were able to persistently apply the principles and methods of organized crime, to capture almost complete control over the powers of governments, and all other social institutions, (i.e., by thereby creating political puppets and masses of muppets.)
"The fundamental problem with central-planning" IS THAT WORKS AS THE APPLICATION OF THE PRINCIPLES AND METHODS OF ORGANIZED CRIME TO CONTROL CIVILIZATION, AND INDEED, WAS THE FOUNDATION OF NEOLITHIC CIVILIZATION.
All private property was based on backing up claims with coercions, with money being the most abstract form of that, since money is measurement backed by murder. THE DEEPER PROBLEMS with respect to the various bogus "solutions" to that social situation based on the same old-fashioned false fundamental dichotomies is those lead towards promoting attempts to realize impossible ideals, which will continue to backfire badly in the real world, where impossible ideals actually cause the opposite to happen.
Everything happening in our "broken markets" is merely more of the same exponential growth in the social pyramid systems controlling society with integrated systems of legalized lies, backed by legalized violence, wherein the controlled opposition to those established systems are just as full of the same bullshit as those sorts of systems originally promoted. I REPEAT: THE DEEPER PROBLEM IS MONEY IS NECESSARILY MEASUREMENT BACKED BY MURDER.
That was not an accident, because the political economy is necessarily inside of the human ecology. Nor was it an accident that the established systems became "successfully" based on the maximum deceits in their death controls, in order to back up the maximum frauds in the debt controls. The established systems are doing what they were designed to do, BUT THAT IS MANIFESTING AT AN EXPONENTIAL RATE, AS THE RESULT OF HOW THOSE SYSTEMS WERE BUILT TO CONTINUE TO AUTOMATICALLY OPERATE.
The degree to which the "market is broken" is the degree to which there is a breakdown in the dynamic equilibria between the various systems of organized lies operating robberies, where the banksters have become so totally dominate that they have almost totally been able to privatize the public powers to rob, and to kill to back up that robbery, while the vast majority of the political puppets and manipulated muppets do not understand that, because they have been conditioned to not want to understand that.
It was not an accident that we are inside of a Bizarro Mirror World, where everything appears proportionately backwards. It is consistent with social success inside of systems based on enforced frauds that those appear to become more and more like insanities, that are growing at an exponential rate! We ARE headed towards times of Peak Insanities, as the runaway generation of debt insanities is tending towards provoking death insanities. That is especially the case because the established systems, including their controlled opposition groups, operated through attitudes of evil deliberate ignorance, in order to enjoy more social successes, based on the exponentially growing systems of legalized lies, backed by legalized violence.
Almost every article on Zero Hedge reveals another wrinkle in those entangled processes. However, those featured articles then almost always finish off their relatively good analysis with implications that the "solutions" are some return to realizing impossible ideals. There is almost never a deeper analysis presented, while realistic resolutions based on such a deeper analysis is ever rarer.
The basics are things which the vast majority of people do not want to perceive, that "the fundamental problem with central-planning" is that civilizations operate as general energy systems, which manifest the principles and methods of organized crime. Furthermore, it is NOT possible to stop that from being the case. Therefore, the only genuinely realistic resolutions to our problems would require developing better organized crime, in order to make and maintain better government.
There is no way to stop money being measurement backed by murder. Any "solutions" based on that ideal are NOT possible, and therefore, guaranteed to actually continue to backfire badly, and cause the opposite to happen in the real world. Most people who promote those impossible ideals of some "return to free markets" are deliberately delusional, while some are perhaps only thoroughly cynical.
The only genuinely better resolutions to our political problems would require enough people understanding enough radical truths about the actual nature of those problems, in ways where those social situations were not magically wished away, in order that the same old impossible ideals could finally be realized. Neolithic civilization was fundamentally based on slavery, through backing up lies with violence. That has been growing at an exponential rate throughout human history. The latest binge of the banksters making the public "money" supply out of nothing as debts (to try to prevent too much of that "money" disappearing back to nothing, due to bad debts), was merely the same old processes of the triumphs of organized crime, controlling civilization, in ways that were operated by professional liars and immaculate hypocrites, promoting the same old biggest bullies' bullshit social stories, (along with the controlled opposition groups doing the same things.)
There are NO realistic resolutions outside of the FACTS that money is measurement backed by murder. What passes for "the fundamental problem with central-planning" at the present time is that IS DUE TO THAT REALITY, which continues to be deliberately ignored as much as possible. People who continue to be "successful" within systems based on enforced frauds are actually trapped up within the vicious spirals of the history of those sorts of social systems.
There is not nearly enough consistent and deeper analysis of "the fundamental problem with central-planning," because there is an entrenched attitude of deliberate ignorance regarding how and why that is due to ORGANIZED CRIME! That the international banksters operate through government enforced frauds is something that the majority of mainstream morons barely have any clues about regarding the deeper nature of, while those few to do figure out the ways that those enforced frauds actually operate as the foundation of our political economy then are almost always reactionary revolutionaries, who promote bogus "solutions" based on realizing impossible ideals about "free market capitalism" ...
Generally speaking, our civilization is based on backing up lies with violence, in ways which have made our real human ecology operate through the maximum possible deceits, while our real political economy operates through the maximum possible frauds. That continues to develop at an exponential rate, towards manifesting Peak Insanities, due the degree to which everything is dominated by the established systems of legalized lies, backed by legalized violence, wherein most people became proportionately successful by deliberately ignoring that, or cynically taking advantage of that.
We ARE facing "broken markets unlike anything seen in history!" However, those are merely the more blatantly obvious manifestations of the basic nature of Neolithic Civilization social pyramid systems, built on being able to back up lies with violence. That was the real foundation of the ability to develop the degree of "central-planning" that we now observe ... as well as why that kind of "central-planning" is accumulating systemic risks beyond reckoning!
Better realistic resolutions of those problems would require developing better evolutionary ecologies within our general energy systems. However, any such more realistic resolutions would have to be based upon accepting how and why the methods of organized crime made and maintained the civilization that we are currently living inside. Natural selection drove the kinds of artificial selection systems that surround us, which have become based on the maximum deceits and frauds. More radical truths, for more real, revolutionary resolutions of those problems, have to provide better systems of artificial selection, which were still consistent with the natural selection pressures that made and maintained the currently existing systems, where "the fundamental problem with central-planning" was ORGANIZED CRIME, which has become so dominate that it gets to pretend that it is not!