Why Dan Loeb Refuses To "Sell In May And Go Away"

Tyler Durden's picture

Last year the biggest permabull within the hedge fund community was David "20x P/E" Tepper. Now that real (i.e., GAAP) forward P/Es briefly touched 21x a few days ago, a new bull had to step up or else Tepper would start sounding like a broken record. That someone is Third Point's Dan Loeb, who not surprisingly looks at a chart of what is set to be record global central bank intervention...

... and observes that "accommodative monetary policy in Europe, Japan, and China has encouraged investors to adopt QE pattern recognition and plow capital into markets where central banks have opened pocketbooks." In other words, more of the same, and with central bank intervention set to hit an all time high just when the recovery is supposed to be raging, who can blame him.

He is correct, if only for now, although recent tremors in the Bund market hunt that increasingly more bond investors are willing to fight if not the Fed, then certainly the ECB. Ironically, if they win, it will be the beginning of the end for central planning.

And just to hedge his optimism everywhere (he notes that "We now have nearly 10% of assets invested in Japan"), the Third Point head also is betting big on the US. Said otherwise, going big or going home.

Here's why Loeb, for the second year in a row, refuses to "sell in May and go away"

We remain constructive on the US for three reasons: 1) economic data should improve in the next few quarters; 2) the Fed does not seem to be in any rush to move early and a June rate hike seems unlikely; and 3) while investors are focused solely on the first rate raise, we think the overall path higher will be gradual, in contrast to previous rate shifts. These factors should create an environment where growth improves and monetary policy stays flexible, which is generally good for equities (higher multiples notwithstanding). We may follow last year’s playbook and ignore the old adage to “sell in May and go away.”

Said simply, Loeb is simply betting that like every other year since 2009, the complete failure of monetary policy to boost the economy (and with Q1 now set to print negative following today's abysmal construction spending data, and Q2 sub 1% if the Atlanta Fed is correct again, the US may already be in a recession) will not prevent it from making hedge fund managers even richer, and stocks will continue rising as global central banks continue to believe incorrectly that stock market records will finally trickle down.

For all his other super bullish views, including his new stakes in Yum Brands, Devon Energy and his 10% stake in Kurodanomics, read the full letter below.

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ebworthen's picture

Talking his book, he makes his money off of "investors".

Watch what he does with his perosnal stash.

booboo's picture

When Dan Lube speaks of "growth" could you at least pin him down on the details of this "growth"?
I'm not seeing this anywhere but in the financial paper pusher.industry

Jumbotron's picture

Dan says....

" LEVER UP boys !!!!   Yellen is printin' like a FELON !!!! "

enforcer92677's picture

Here's hoping you moronic douchebag.

Osmium's picture

Let me see if I understand this.  The CBs have printed soooo much money that there is nothing left to buy?  He won't sell because there is no place else to put money? 

Does that sound about right?

Zirpedge's picture

Yes, classic scarcity and price appreciation due to demand. 

Ham-bone's picture

I just can't imagine after all this that there will come a point when the Fed and politicians say "no more".  They only know moar and moar.  Seems we are well on our way...resulting in less and less.

http://econimica.blogspot.com/2015/04/so-simple-even-economist-or-fed-can-get.html

And every step requires even more intervention and takes us farther from free markets or "capitalism"...leaving us with a choice of ever greater statism (delaying the collapse) or pull the manipulations and collapse immediately.

Truth is the Fed and .Gov in control of infinite debt have decided to make nearly all of us the greater fools...if we won't buy, they'll do it for us.  If we won't take loans...yup, they'll do it for us. But this way they can still maintain a few winners while the rest lose.

I don't disagree that their efforts are doomed...only that since '09 and really since '11 the whole game has changed.  Bond markets were first warped by QE and then in July of '11 bond markets ceased to freely exist (links below).  Once the largest market was broken, CB's owned it.  That is also when commodity market prices collapsed on heavy buying in certain segments.  Also, since then, no serious equity corrections.  Once the Fed took over one segment...the whole thing was too interconnected so pretty sure the Fed / CB's had to go all in. 

http://econimica.blogspot.com/2015/02/fundamentally-flawed-chapter-6-debt.html

http://econimica.blogspot.com/2015/03/china-sells-treasurys-yields.html

http://econimica.blogspot.com/2015/03/brics-blink-or-more-correctly-wink-and.html

Of course it will fail but pretty sure not in a price correction manner...I'm guessing the ultimate failure will be more akin to N. Korea like ongoing disconnect between economic negative reality and financial boom BS.  Real economic issues will get worse and haves / have nots grow more contentious.  All this likely leads to a stronger statist response.

So, don't get me wrong, this won't work.  But not working doesn't mean prices being allowed to find an equilibrium between demand and supply.  Not working can mean economic debilitation and the only answer always greater statist intervention to "save us" from collapse.

kaa1016's picture

He's right. Anyone making trades using traditional macro has underperformed, if not lost money over the last few years. As long as monetary policy is easy, stocks will keep going higher. All you have to do is look at the last 6 years. If the enonomy improves, I think we could see a late 90's type of lift off because the central banks know that they can't raise rates anytime soon, so even though you may get a small correction, the general trend is higher due to global QE. It's never a good idea to bet against the guys who make the rules.

Zirpedge's picture

Not sure what market you guys are loking at or what your basic comprehension of supply v demand is. The scarcity due to "Nothing left to buy" will continue to raise prices. Everywhere I look, I see the thick green stocks of a healthy recovery. The efforts of FED policy over the last few years have been a complete success and it's time for them to step back and watch this economy stand on it's own two feet. A proud moment.  

Toolshed's picture

Hey Zirpedge, you forgot the /sarc tag.

Yen Cross's picture

  That must be "million $dollar douches" other handle.

Toolshed's picture

I actually miss MDB. That guy was an absolute riot!!! It is kinda boring around here without MDB and Phonestar making all those funny noises.

venturen's picture

Thanks Bernake! Could you explain when debt starts to crush the life out of an economy? and say DEATH TO SAVERS

Consuelo's picture

/sarc or not, you are 'correct' to a degree, Zirp.    And I can attest to that with an 'empirical' observation/correlation of automobile traffic at peak hours, to 'improving' economic conditions - at least here the Bay Area.    It's all 'real', don't get me wrong - however...

What isn't said nor implied are the mechanics of how the 'thick green stocks' came to be, and just how robust and resilient they would be, if for without unnaturally 'easy money'.   Unnatural to the point of total distortion of the tried & true construct of savings and investment, vs. debt, finance and domestic manufacturing capabilities vs. account deficits, vs. employment in 'real' areas, not 'leisure & hospitality', 'health-care', and bar-tenders.

 

 

 

Randy Goodnight's picture

"We may follow.  .  .  . 

Translation:  You retailers stay in so we can exit

venturen's picture

awesome....I am net awesome. They have printed enough money to buy everything. What the heck could go wrong...what happens when all this printed money need to be collected back? Oh to be 20 and clueless to what is coming.

BullyBearish's picture

Another exercise in range-bound short loading/bagholder creation...

nakki's picture

Let see 7 YEARS into QE and the recovery is just around the corner again and again. Where would EPS be without corporations buying back their own shares? How often do corporations buying back their owns shares end up buying the top only to offer secondary shares at a later date? If history is any indicator at some point in time the S&P will see 1200 again. Just remember that at 2300 on the S&P (only 10% away) the stock market would be trading at or around 135-140% of GDP, and the last few times it did that we had a 50-80% correction. Good luck with that.

Jacksons Ghost's picture

Daniel Loeb.....What tribe does this arrogant prick belong to?

Vin's picture

".....and stocks will continue rising as global central banks continue to believe incorrectly that stock market records will finally trickle down."

Are you stupid?  Central Banks don't give a shit if wealth trickles down!  You make it sound like they're concerned about our economy and welfare.  Please.

These people only care about 3 things: control, control and control.  If you want to guess what happens next, then try to assess what action will give them greater control over our resources, wealth and our bodies.

Maybe then you'll come up with the right answer.

rejected's picture

"...1) economic data should improve in the next few quarters; 2) the Fed does not seem to be in any rush to move early and a June rate hike seems unlikely;..."

1) Hilarious,,, standard mantra since 2008

2) LOL. You have to admit,,, these crooks have a good sense of humor.

 

Easy Peezy being a fund manager these glorious days.

Just BTFD or BTFATH  whichever occurs.


DipshitMiddleClassWhiteKid's picture

i wonder if the guys buying farms in new zealand are doing it with the 2% management fee or taking proceeds from the 20% performance fee.

 

im willing to bet the former!

 

 

this summer is going to get interesting as im sure the cops will keep killing black people and the elites will stir the pot to cause riots

BoPeople's picture
BoPeople (not verified) May 1, 2015 12:32 PM

The truth will be in what he does and not what he says.

That being said, he may be telegraphing his intent legally, as opposed to illegally colluding in secret with others to manage the market.

We do not know who has been designated by the controllers to be on which team until we see their actions ... and maybe not even then. I am sure he is a willing slave because he is treated so well.

Wild Theories's picture

So in a macro sense, Dan Loeb is betting on

1)a bounce off the bottom pick betting on hopeful Chinese consumer demand

2)a value pick betting on higher oil

3)a share buyback and other activist shenanigans pick betting on more farce in Japan

 

hmmm, I think the Japan bet is the safest

LAZARUS TAXON's picture
LAZARUS TAXON (not verified) May 3, 2015 7:18 PM

as