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Investors Paranoid That Other Investors Are Even More Paranoid

Submitted by Tyler Durden on 09/15/2015 09:11 -0400

One month ago, when investors were asked what they thought was the most crowded trade, respondents to BofA's monthly investor survey overwhelmingly replied: everyone is long the USD. Which, of course, is ironic because while everyone was lamenting the long USD "hotel" trade, at the same time these same investors admitted that a China recession and an EM debt crisis were the biggest tail risks for the global economy: obviously, if China or the EMs implode, the USD would soar even higher so it was somewhat intuitive that the two would go hand in hand.

Fast forward one month, when the same question yields a peculiar response: yes, the long USD trade is still seen as the most crowded trade by 27% of investors, but in spots 2 through 4 we have some curious newcomers, namely:

In 2nd spot, "Short Emerging Market equities" with 20%
In 3rd spot, "Short Commodity Stocks" with 15%
in 4th spot, "Short EM FX" with 8%

Visually:

What makes this chart even more ironic than last month's, is that while most investors admit the truth about wholesale positioning in a world in which one word out of place by the Fed can bring the whole house of cards crashing down, these are precisely the same trades that the respondents have put on themselves even though they are concerned that others have the same trades on, creating a positive feedback loop of fear that nobody is hedged enough against a potential EM-driven collapse.

Because as the chart below shows, while investors are lamenting others' positioning, fears about a China recession and an EM debt crisis are by and far the two biggest "tail risks" preoccupying investors' minds right now.

In other words, investors are now paranoid that other investors are even more paranoid.

Let's hope Dr. Yellen has the right medication this Thursday to cure the paranoid investing world of its latest Fed-induced psychosis.

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Tue, 09/15/2015 - 09:05 | 6550078 XAU XAG

Just follow the trend...................it is your friend

Tue, 09/15/2015 - 09:13 | 6550115 ArkansasAngie

HOrse manure.

Tue, 09/15/2015 - 10:06 | 6550346 Manthong

You are not being paranoid if they are all really out to get you.

Tue, 09/15/2015 - 11:30 | 6550719 Luc X. Ifer

So the race now is *who's the most batshit craziest off all?!*

Tue, 09/15/2015 - 13:28 | 6551376 Plunge Protection

"Fed falls behind the curve" ... should't this be 100%, when are they ever ahead of the curve?

Tue, 09/15/2015 - 09:05 | 6550081 Takeaction2

Raise the rates Yellen you fucking bitch...I dare ya.

Tue, 09/15/2015 - 10:11 | 6550383 Zirpedge

I agree, should fed chairperson Yellen make the right decision and raise rates now it will be viewed as confirmation of the recovery we have all experienced.

Tue, 09/15/2015 - 09:05 | 6550083 saints51

Why are investors worried? I thought the economy was awesome and China is no big deal to the world.

Tue, 09/15/2015 - 09:20 | 6550137 Tall Tom

There is no such thing as an "investor".

Is there investment into a company that actually produces income from production and sales of actual goods...rather than Financialization and QE? Where? Certainly not on Wall Street.

They need to name the "Trading Houses" as Casinos. At least there'd be some truth in advertisement.

It all started to fall apart when Gambling Corporations as Sands and Sahara began to be traded. That was the real sign that something had become really rotten in America.

Tue, 09/15/2015 - 11:47 | 6550088 knukles

Wall Street Sociopathic Paranoia: My paranioa is bigger than your paranoia

BTW, IMNSHO, I find it a bit strange when surveys that appear in the investment industry or popular press talk about "tail risks" when everything being talked about is known and reasonably discounted ad nauseaum. Tail risk to me is more of the unforeseen type, black swan, big time Charley nobody (really) saw it coming or certainly very contrarian opinion stuff

Tue, 09/15/2015 - 09:07 | 6550089 buzzsaw99

as long as the fed can keep the stock market cart in front of the real economy (dead) horse everything will be fine. /s

Tue, 09/15/2015 - 09:08 | 6550095 yogibear

It's 0% and QE to infinity until the dollar bust. The Federal reserve is stuck in a box doing this until the rest of the people realize this.

Tue, 09/15/2015 - 09:18 | 6550134 buzzsaw99

twenty years from the usa will be where japan is now, radiation and all. the fed will be buying stocks and bonds, trying to get back to decades-old former highs, while the entire economy along with the currency dies in bits and pieces. goldman sachs of course will still get their bonus.

Tue, 09/15/2015 - 09:46 | 6550251 Dr. Engali