Everyone On Wall Street Is Nervous That Everyone On Wall Street Is Long The Nasdaq

Tyler Durden's picture

When we summarized the latest batch of 13F reports this morning, we found that in the first quarter the who-is-who of brand name hedge funds scrambled to buy up the big 6 tech stocks: Facebook, Apple, Amazon, Microsoft, Alphabet and Netflix, which is either the cause or effect of a 26% average return for these 6 names, and which together are accountable for nearly half of the YTD gains of the S&P according to Goldman calculations.

Ironically, it has not escaped Wall Street that with few other trades working, everyone else on Wall Street was also buying the same handful of stocks, which in turn has made Wall Street quite nervous.

That is the finding from the the latest monthly BofA Fund Manager Survey, according to which the most crowded trade is no longer being long the US Dollar, which has dropped to third place after the recent rout in the greenback, but being "long the Nasdaq" which some 26% of the 213 managers who took part in the survey said is the latest and greatest "hedge fund hotel" trade currently; it was followed in distant second place by "Long European Equities."

Until May, owning the U.S. dollar had been the most in-consensus pick for five months in a row. The streak began in the wake of November's election amid hopes that pro-growth economic priorities from the Trump administration might spur the economy and higher bond yields, and push the dollar higher. Instead, the dollar has now given up all post-election gains.

Also not surprising is that in light of the recent euphoria for European risk exposure, being "Long European Equities" is now the second most crowded trade, something JPM also touched upon yesterday when it noted that further gains for European equities are limited and urged to go short Europe.

Incidentally, the same survey also showed that respondents were correct: according to BofA, the survey participants indicated that their allocation to European stocks has surged to the highest since March 2015, and is now the third highest on record.

Also of note: despite chasing both European and Tech exposure, the same survey showed that the number of respondents who believe the market is now overvalued is the highest in 17 years.

And where is this overvaluation the highest? Why in the US of course.

* * *

So with markets massively overvalued, and everyone clustered into the same trade, what did Wall Street think is the biggest tail risk for the month of May? The answer: a Chinese credit tightening... which may explain why overnight China injected the most cash into its banking system in four month.

And something curious: May 2017 was the first time China emerged - in some capacity - as the biggest tail risk according to Fund managers, replacing months of worries about European disintegration and fears about a Trump victory. In fact, the last time everyone was worried about China was back in January 2016 when the global capital markets were tumbling, and only the "Shanghai Accord" in February of 2016 prevented what at the time seemed to be a near certain recession.

Here are all the key findings from this month's fund manage survey:

  • Investors’ macro expectations find global economy to be just right, with a record high 34% citing a Goldilocks scenario of high growth and low inflation
  • China replaces European disintegration as the most commonly cited tail risk for the first time since January 2016, with 31% of global fund managers citing Chinese credit tightening as the biggest risk in the market
  • Long Nasdaq is seen as the most crowded trade for the first time, knocking long U.S. dollar off the top spot after five months; despite this, net 23% of investors still say the USD is overvalued
  • Profit expectations are at a three-year high as net 56% of respondents say global profits will improve over the next 12 months
  • FMS cash levels remain unchanged from April at 4.9%, still above the 10-year average of 4.5%
  • Investors’ views on valuation continue to vary by region: net 82% of fund managers think the U.S. is the most overvalued region, near April’s all-time high; meanwhile, Eurozone and EM equities are seen as undervalued, at net 20% and net 44% respectively
  • Net 59% of investors are overweight Eurozone equities, up from net 48% overweight in April and the highest allocation since March 2015
  • Allocation to UK equities rises to a net 27% underweight versus net 34% underweight last month
  • Japan equity allocation fell for the second month to a net 12% overweight as investors increase their allocation into European equities
  • But irrationality is not yet visible despite all-time highs in credit and equity markets, robust global EPS and a benign French election result.
  • Allocation to Eurozone equities is at its third highest level on record. The recent outperformance seems due for a pause, especially versus the U.S.
  • Although global investors’ allocation to Japanese equities declined for a second month; easing risk factors, better currency levels, and fundamentals hint of a possible summer rally.

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This is it's picture

As the famous saying goes, buy all the things!! 

quadraspleen's picture

What was the other famous saying from someone at Bear Stearns? "like trying to sell your seat at the theater while you were inside, to people walking past outside, while the theater was burning down"

 

Manthong's picture

.

Sung to “Noel”…

No bid, No bid, No bid No bid

What would you do if there was no buy bid?

No bid, No bid, No bid No bid

I guess the Fed will just buy up your gig.

 

 

Rich Stoehner's picture

Why would anyone be short? This is free money!

quadraspleen's picture

free, maybe. money? not so much

Valuator's picture

And the fun begins when they want to see if they can lock in some gains.

No volume at market tops.  Sorry, not sorry.

CPL's picture

All that stuff requires electricity though...oh wait, getting a head of the script titled 'start from scratch, kill them all'.

spastic_colon's picture

"Long NASDAQ"? this must mean something different to me than being long FANG's and the names you mention in the first chart; one thing you forgot to mention is that the names on your list all own the rest of the NASDAQ thru their various off-balance sheet incubator companies and funds...........they are all just auctioning shares of each others investments to each other thru the fed and wall street; you also forgot PCLN who owns just about every NASDAQ traded travel site ever created.

SloMoe's picture

The meltdown is going to be epic...

SloMoe's picture

Depends on what you had for dinner...

decentralisedscrutinizer's picture

 

Almost all the world’s economic and political problems revolve around the hegemony of a global corporate cartel, which is headquartered in the US because this is where their military force resides. The only way to regain our sovereignty as a constitutional republic is to severely curtail the privileges of any corporation doing business here. As a free nation, we really have to stop granting corporate charters to just any “suit” that comes along without fulfilling a defined social value in return. The "Divine Right Of Kings” should not apply to fictitious entities just because they are “Too Big To Fail”. We can't take the incorporation of private transnational banks for granted anymore. The government must be held responsible only to the electorate, not fictitious entities, if we are ever to restore sanity, much less prosperity, to the world.

 

 

 

It was a loophole in our Constitution that allowed corporate charters to be so easily obtained it created a swamp of corruption around our capital. It is a swamp that can't be drained at this point because the Constitution  doesn’t provide a drain. This 28th amendment is intended to install that drain so Congress can pull the plug ASAP. As a matter of political practicality we must rely on the Article 5 Convention for which the electorate will need consensus beforehand. Seriously; an Article 5 Constitutional Convention could solve that problem in days. This is what I think it will take to save the world; and nobody gets hurt:

 

 

 

28th Amendment

 

Corporations are not persons in any sense of the word and shall be granted only those rights and privileges that Congress deems necessary for the well-being of the People. Congress shall provide legislation defining the terms and conditions of corporate charters according to their purpose; which shall include, but are not limited to:

 

1, prohibitions against any corporation;

 

a, owning another corporation,

 

b, becoming economically indispensable or monopolistic, or

 

c, otherwise distorting the general economy;

 

2, prohibitions against any form of interference in the affairs of;

 

a, government,

 

b, education, or

 

c, news media, and

 

3, provisions for;

 

a, the auditing of standardized, current, and transparent account books, and

 

b, the establishment of a state and municipal-owned banking system

 

c, civil and criminal penalties to be suffered by corporate executives for violation of the terms of a corporate charter.

 

 

 

The Founders had to fight a bloody Revolutionary War to win our right to incorporate as a nation – the USA. But then, for whatever reason, our Founders granted the greediest businessmen among them unrestricted corporate charters with enough potential capital & power to compete with the individual States, smaller sovereign nations, and eventually to buy out the Federal government itself. Now that these fictitious entities own the USA and command its military infrastructure, by virtue of the Federal Reserve Corporation, and run it by virtue of regulatory capture, MSM propaganda, and Congressional lobbying they’ve set their sights on the creation of an all-inclusive global financial empire. The US Constitution is the “Kingpin” of the whole global Machine.

    

zzzz88's picture

all are on the same side of the boat now?

super!

finally there are enough meat on the table

Hongcha's picture

Almost.  Eying a short QQQ but not today.  Maybe enter the position if we gap open and fail like we did this morning.

GodHelpAmerica's picture

Good news. It's allllll good. Algos also buy the Nasdaq on news of widespread nervousness...BTFATH.

Consuelo's picture

 

 

All I can say from somebody living right in the middle of this insanity, is that it is going to be a 'Beautiful thing to behold'...

In a morbid sense, that is.

 

 

Blankfuck's picture

More Fed Fucker Delight in June wont bring the market down-no worry

U4 eee aaa's picture

I said this four days ago. It is playing out and will continue to play out:

So my guess is the FAANGs will soon become self reinforcing momo that becomes the market like it has become the Nasdaq. 75% of the 200 billion the CBs print will flood into them until retail starts getting their animal spirits animated by the trade. With irrational greed fuelling this, it is going to be very hard to argue a case against the FAANGs, so this trade could go on for quite some time. People will argue that these stocks have tons of cyberspace and commerce to fill out. What happens if Amazon starts swallowing bricks and mortar operations?

I'm calling the FAANGs almost bullet proof in the eyes of retail.

Russdiamon's picture

 

I’m not sure how long this can go on. I’ve been listening and following this guy for awhile and he is predicting a top with specific dates.

 

I definitely recommend checking him out, he has an excellent track record. Check this out https://www.sentimenttiming.com/Alexstanzo/15

 

 

Grandad Grumps's picture

Isn't this the point in time where those who CONTROL price do a headfake down to try to shake the tree to knock those who are insiders off their position?