Confused By The Market? Here Is What The Smart Money Is Doing

Tyler Durden's picture

Want to get into the head of a hedge fund manager, and see how they view the market: why just buy Apple of course, however good luck explaining to your LPs why you deserve 2 and 20 for "active asset management" aka just following the herd into the biggest hedge fund hotel in history (for at least 216 hedge funds it may be a tough sell). So for everyone else, Goldman's David Kostin (who still has a 1250 year end S&P target - the definitive indicator to sell everything will be when he too gives up) has compiled the data in all the just released 13Fs and has summarized the results as follows...

From Goldman

Our most recent Hedge Fund Trend Monitor report analyzed 674 hedge funds with $1.1 trillion of gross equity positions consisting of $715 billion of long single-stock and ETF equity assets and an estimated $383 billion of short single-stock and ETF positions. We have published our Hedge Fund Trend Monitor quarterly for the past six years and analyzed constituent-level portfolio holdings of US hedge funds since 2001. The current report focuses on hedge fund positions at the start of 1Q 2012 and is based on 13-F filings as of February 15, 2012. We highlight 7 conclusions:

1. The typical hedge fund operates 46% net long versus 36% in 3Q 2011. Aggregate net exposure equals $332 billion. We estimate 17% of short positioning is conducted via ETFs with 13% occurring at the index level.

2. Combining long and short position data, hedge funds have the greatest net portfolio exposure to Information Technology (21%), Consumer Discretionary (20%), and Energy (14%). Hedge funds are not benchmarked but relative to the Russell 3000 universe they are 800 bp overweight Consumer Discretionary (20% vs. 12%) and 750 bp underweight Consumer Staples (3.5% vs. 11.0%). Net exposure rose in every sector in 4Q.

3. Turnover of all hedge fund holdings averaged just 28% during 4Q 2011, an all time low. The top quartile of positions (largest holdings)  turned over just 14% while the bottom-quartile (smallest positions) turned over 41%. Since 2001, quarterly turnover of fund positions averaged 35%, peaking in 4Q 2008 at 45% but falling steadily since. Turnover fell in 4Q in all sectors.

4. Hedge fund returns are highly dependent on the performance of a few key stocks. The typical hedge fund has an average of 64% of its long equity assets invested in its 10 largest positions compared with 34% for the typical large-cap mutual fund, 18% for a small-cap mutual fund, 20% for the S&P 500 and just 2% for the Russell 2000 index.

5. Apple (AAPL) matters. One out of five long/short hedge funds has AAPL among its ten largest long positions and approximately 30% of  hedge funds own at least one share of AAPL. When it ranks among the top ten holdings, AAPL represents an average of 8% of single-stock long equity exposure. In aggregate, hedge funds own only 4% of AAPL equity cap. The average hedge fund AAPL position equals 1.6%, given 70% of funds own no AAPL.

6. Five stocks have been in our VIP basket since inception in 2007 (18 quarters). AAPL, GOOG, MSFT, QCOM, and CVS have ranked among fundamentally-driven hedge funds’ top 10 holdings for more than 5 years. AAPL (+195%), QCOM (63%) and CVS (12%) outperformed the S&P 500 return of 4% during the same period. MSFT (-4%) and GOOG (-8%) lagged.

7. Turnover for the VIP basket in 4Q 2011 was below the historical average. 12 new constituents entered the VIP basket in 4Q 2011 compared with an average quarterly turnover of 17 stocks since 2001. New constituents include the following: BAC, DLPH, ESRX, HAL, HPQ, LMCA, MCD, PXD, PCLN, STX, TYC, and VIAB. The following stocks are no longer in the basket: AMT, ABX, CHK, CMCSA, CCI, EMC, EXPE, HES, M, ORCL, PG, and WLP. Exhibit 50 on page 17 contains a list of all 50 current constituents in our VIP basket.

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wrs1's picture

Wow and I am short AAPL, hope the herd gets spooked....

Mr Lennon Hendrix's picture

Either that or it runs of a cliff.

SGS's picture

Less then 3% of hedge funds have Gold and silver exposure, and not to mention not even near in the millions=BUBBLE

Yet AAPL has 216 hedge funds on board (everyone that cares)= No BUBBLE???????????????

Ask yourself: What the fuck is going here?

resurger's picture

The sheeple are prophets that can predict the top's, dont worry.


earleflorida's picture

the irony is, as you transcend to the top, there are many interval pauses, for gravity in it's quirky ways, works with you,... unfortunately the laws of gravity aren't so benign on the descent  

Cadavre's picture

WTF does smart money mean anyhow? And, is a "smart money" basket anything more than PR chumming apathetic retail carp to convert what assets they can still claim into bulk quantities of an insider dump laxative?

BAC? Are we in the emerald city (again)? Pinch me - I'm dreaming!

Did BAC just have GS write a truckload of CDS to short their last CDS "experiment"? You know, just in case a default somewhere has the last batch investment widgets get called?  If they sold them off to their non-prop investment clients, youz gotz to know they did!

Maybe "smart money" is just another way of saying the guide for the guillotine blade was lengthened to give it more "fly" time (better to loose head later than sooner?)!


blindfaith's picture



Some Defination here might help:

Working smarter: manager getting a person to work longer hours for the same or less pay.

Smart money:  loading the fund with names the 401k crowd loves to see to feel smarter.

Working money: obsolete term

Smart/smarter: What you beleive until you don't.

brettd's picture

This from the best and brightest at Harvard and MIT?  Yeesh.

Dermasolarapaterraphatrima's picture

Sloppy wet when the AAPL Bubble meets its Pin.

blindfaith's picture

The day someone prints all the money they toss and dumps into anti liberty, anti freedom, anti human rights organizations, maybe some of the 'too kool' snobs will wake up.  No one was more supper right neo con than this over celibrated rat.

Sudden Debt's picture

I think you better waited 2 more months to short it

AbelCatalyst's picture

As soon as aapl drops below the 20 DMA I'm with you... Too much momentum for me, but this thing is going to drop like a rock when the recession hits in force - discretionary income is already shrinking and the shiny little toys will be the first to get cut from household budgets... It's a ticking time bomb for sure...

WonderDawg's picture

I've been saying the same thing since it was at about 380. Haven't shorted it, but kept wanting to. Once I'm convinced it's topped, I'll place my bets, but I'm still waiting.

boffster's picture

Bullshit - you can eat ipads don't you know.

ChrisFromMorningside's picture

I'm cracking up listening to the two local buffoons on the radio giving "investment advice." Apparently, equities are currently "the opportunity of a lifetime." Apparently, the DJIA should be at 39,000 (I shit you not) if it weren't for this horrible, unexplainable pessimism that is hanging over the country. These guys are shocked, shocked I tell you, that retail investors are pulling their money out of the market instead of jumping at the amazing buying opportunities that are out there. I mean, even Warren Buffet said this was a prime buying opportunity for equities, who are you to argue? You can't make this shit up.

bdc63's picture

sounds like they are engaging in a little game of pump & dump

blindfaith's picture




where is Suzzie when you need her? 

ZeroIQ's picture

Your'e brave there, I think they will suffer in the longterm against GOOG but no way I'm shorting them yet.

monopoly's picture

The only one of the 5 stocks that I would even consider in my portfolio would be MSFT. But then again, my assets are kinda tied up in real money. Not too much confetti left. I guess my user name says it all. Outside of real "money" this is what it all is. Just crap to play a game with. 

Think I will pass on the top 5. I am not as smart as all those brilliant hedge fund managers. 

DoChenRollingBearing's picture

The smart money???

I review this weekend's Barron's (BIG money) at my blog ("Review of Barron's, Dated 27 February").  Find out what Gov. Chris Christie had to say about American Oligarch Warren Buffett (thx WB7!) and what Jeremy Grantham has to say.  Curious?  gmail me at my name and promise to behave, or just use Google...

WhoMe's picture

 If it wasn't for Apple's 100 Billion in cash I think it would be a great short candidate. What product do they have that many others don't also have? Currently they have a very loyal following plus they put out a great, refined product but again, they are reallly only as good as their next breakthrough product beyond MP3 players, phones and Tablets.

RiverRoad's picture

Curious how no one seems to mind their suicide sweatshop over there in China.  I guess it's OK if  it's Apple that doing it.

earleflorida's picture

"Foxconn" which manufactures for Apple et.el., is a wholly owned Taiwanese Company and happens to be the world's largest electronics manufacturer.

you might be asking yourself,... how is that - when just a decade ago, Taiwan and China were at each others throats? Money!

Think of Japan the arch nemesis of China for literally centuries now its best trading partner? Survival?  

falak pema's picture

Evolution in the face of Pax Americana; it makes everybody see more clearly their relative strengths and weaknesses. 

Taiwan was just a wet dream of Mao from Koumintang days that got meaningless after 1978. Now Japan is suffering, they who have created the New young giants of K/T/HK/Si during 70s as alternative local market to a US market protected by Nixon from 71 on.

Thats old hat too, since 90s globalisation, as the US Outsource model took over and enhanced what Japan had started. And Japan junked its economy in hubristic RE play from 90 onwards. So they have no choice too as they have vegetated there where SE Asia and China have ramped up big.

Globalisation will now progress with or without first world leading it, given its internal debt problem. That's the NEW story.  

css1971's picture

Well now, that all depends on how much it costs to make that there and then transport it to here.

DosZap's picture


"Foxconn" which manufactures for Apple et.el., is a wholly owned Taiwanese Company and happens to be the world's largest electronics manufacturer.


Who is farming out the work to the Chinese.China just announced a 15-20% PAY RAISE for their employees.(Dell,HP, and Apple), are wondering how to eat, and/or PASS Along those price increases to the US consumer, and whoever else buys them.

Raging Debate's picture

China's goal is now domestic consumption. I am seeing regional smaller competitors have lower pricing AND better quality then Wal Mart.

The U.S. policy of sell the country short is about over. Not much left nailed down.

swani's picture

@River Road

Yeah, it bothers me, but they are the only ones, in my humble opinion, making beautiful lap tops. Unfortunately, IT is not fashion, so there is very little beauty to choose from and if I have to look at the thing every day, call me superficial, I can't live having to look at something I find ugly. None of the other similar phones or computers that have come out to compete with Apple are doing it for me, they are just ugly derivative copies of the original. Repros are ugly to me too, for different reasons. It's like those fake Marylin Monroes or designer impostors, but, if someone made a better, and original, piece of equipment and promised that people were not committing suicide to make it, I would definitely switch on principle. 


RiverRoad's picture

Same here.  I have an Apple too; primarily for the security which so far has not failed me.  I'd pay a few bucks more for my next one though if Apple would get a conscience.

DosZap's picture


Curious how no one seems to mind their suicide sweatshop over there in China.  I guess it's OK if  it's Apple that doing it.


You left out HP, and DELL.

RiverRoad's picture

Thanx.  Fixed it for me.

Sudden Debt's picture

I've implemented 200 ipad for our salesforce but now i think i've made the wrong decision not to go for the androids. Buildings apps is so much cheaper for a android instead of ipads. Developpers charge a arm and a leg for it and i'd rather make them myself and the only once i can make are for androids.

samwell's picture

Linux OS(ubuntu) is far superior to apple OSX and it is free! and so are all the apps.  Steve jobs basically stole Unix to create NEXT and then called it his own.  typical jobs ego.  it is beyond me why anyone would pay for an OS these days.  

android OS for phones is also vastly superior to iOS crap with its gimmick Siri.!  that was desperation release since they didn't have a 4G phone to compete with android and verizon.  apple has no advantage other than a bunch of inbred yuppy scum have discovered there asthetic appeal and use them as a status symbol among their other yuppy inbred cohorts.  wait till apple products start getting viruses.  then the sheep yuppy scum will jump ship.

css1971's picture

You don't understand. Apple is a religion, not a company. Didn't you knotice the CEO dressing like a minister and giving sermons? Apple users believe they matter because they have an iPad. It makes them relevant as people, validates their self image. Sanctimonious is the word I'd use, the iPad is their bible.

Reggie made the same mistake. You don't fight god by saying that other religion is better, faster, easier. What you can do is point out the hypocrisy, the failings, the mediocrity, the ordinaryness.

WonderDawg's picture

Funny thing, I've never owned an Apple product, and as far as I know, my life hasn't suffered any negative effects. And I don't pay attention to whatever kind of electronic gadget anyone else has. I guess I'm old school that way.

Cadavre's picture

The first time we heard "i-Phone" was a movie titled  "Johnny Mnemonic" back in the mid nineties.

Reacalling, with fuzzy recollection of the pricise history, that the UNIX copyright was paid for and owned by US taxpayers. The shell or prompt language for UNIX was C!  Can't recall which ones, but a lot of the early computer languages were developed by military engineers. Fortran was inented by navy girl. A popular DOS/WIN/UNIX/OX programming tool in it's day, xBase, was written by NASA enigeers.

At any rate, thinking ATT / Bell Labs enjoyed an exclusive license (granted by US taxpayers) for UNIX. Conjecturing on, the terms required that UNIX become public domain when ATT's / Bell Labs' license expired.

Apple's  GUI was handed to them on a silver platter by Xerox. Xerox developed it for their "DataStar" computer. MS cloned or bought Apple and Xerox enginners for their Windows GUI.

Job's gift was not so much that he was an OS or IC guy . He was a salesman. They guy that defined point B (direction enthusiasm momentum) . Aside from his take no prisoners product campaigns, the reason the he was a "visionary" was his gift for aesthetics: simple seamless perfect. He was a master of Feng Shui!

Feeling a tad angry today, ain't ya? Helps on the way! For a real anger boost read this:
Did you read the small print when you downloaded that Smart Phone app (Article says if you watched U-Tube on yur smart phone - U-Tube knows what and when called those 1-900 dollar a minute wild and crazy girl party lines as well as buy and sell text messages you sent your broker!)?

ubuntu if for boiler plate retail coding shops - and, just like Zone Alarm - it calls home - what is ubumtu saying to mom when she picks up the phone (probably the same things smart phones are saying to the U-Tube. And, lest we forget, ubuntu's reliance and relation with Guugle is problematic if the client's / user's privacy is a consideration.

Guys with a real pair prefer compiling UNIX OS from source code they maintain to an off the shelf retail Guugle feeding appliance.

OldPhart's picture

I don't know anything about all that gobblygook.

I don't have anything from Apple except some sort of movie doohickey on this computer.

I have a Taliban Telephone I bought from some grocery store for $15 dollars and buy 100 minutes about every four months or so.  I use it to make phone calls, and have recently learned I can send text messages so I do that once in a while to people who I know are in working hours.

I'm not enamored by the ultra-technology available, I just want a phone in case I'm broke down on the road somewhere. 

And I get irritated by everyone finger-fucking their phone rather than actually being involved with real people that are physically in their presence.

Cadavre's picture

Then you be one of the smart ones (see the article on "reading small print 0 hope you ain't using IE)!

Personally - don't have a cell phone, don't use wifi and wear a main spring watch! 2 nestling's have iMacs - one PC. One iPhone one iPad one Android (the chilln' are spoiled 4 sure!)..

There  may be some redeeming qualities to smart phones. IEE has a white paper that explores smart phone pier to pier app development (no tower required).

Taliban Phone (LOL)

THe reach around to enamour the public with the unwarranted wire taps was the PONZI man would only listen in if the call originated from a known terrorist or a client accessed a known terrorist web portal. Two questions:

1) Where is a copy of the know "terrorist" phone directory.

2) Any zit faced punk working a mall phone kiosk can program a phone to appear to print any phone number and serial required. The US was supposed to handover  keys to the "internet backbone" years ago, but hasn't. And, BTW, the US secret police can spoof any internet DNS their funding drives require.

In 2001 the so called host for the CIA's so called Al KADA was a US ISP called, "Everyones Internet"




Mr Lennon Hendrix's picture

The collapse of the Fiat Ponzi will be the Black Swan event.  When will it happen?  Who knows.  But the fact that everyone is and will play the game until the end is evidence enough.

Money managers don't want it to end, so they close their eyes and suit up, ask for orders, and cap the day with a few stiff drinks.  Hippie liberals don't want it to end because they just want to retire so they can do yoga in their yurt on their 1.5 acres.  Red neck conservatives just want to go huntin' and drink their beer in peace.  The old folks just want to die already, and hipsters really just don't give a fuck, as long as they can whip out their Macbooks and ask facebook, "who is the farest of them all?"

Of course while Americans are nurishing their egos, Europeans are wondering similar things.  And the Chinese are scratching their heads as to what happened to their fantastic growth model while they eat their plastic peas.  And the Japanese are asking themselves why they have all had migraines for the last year.

Even when any of the former are reminded that fiat currency has no value, they reply, "it doesn't matter, all that matters is that we believe it does."  How old is the average person's emotional IQ nowadays?  5?  If we just believe it won't happen here, it won't is the meme that will go down in the history books.  This culture and this stage of human history will be looked at as the most foolish ever.  It will be asked if we did this delibrately, maybe because we wanted to destroy ourselves in a manic masochistic death cult ritual.

And this meme carries out to the far reaching corners of the society.  The battle between utopeans and peak oilers has reached this point.  Let us consider what would happen if the majority of the world decided to use peak oil thoery (which they have not, as the majority either do not consider it, or do not believe it).  Let's say it was considered.  Would anyone be harmed?  No.  No people would not shut down society, that would be crazy.  Instead we would spend money on alternative energies and try to find the other resources (I am not thinking about governments playing any role in this, btw).  Yet if we all pretend like the world has limitless energy available to us right now, and we are wrong, then shit will hit the fan, and imagine the horror.

Yes, utopeans are the death cult, just as Keynesians are.  Being proavctive will save us.  Doing what we have always done will be the end of this crazy little world.

RiverRoad's picture

Like Chuck Prince they're dancing 'til the music stops.

Crimedog's picture

Even when any of the former are reminded that fiat currency has no value, they reply, "it doesn't matter, all that matters is that we believe it does."


Haha, that's funny because you could say the same about gold.  As long as governments require that we pay taxes in a fiat currency, the fiat currency will have more *real* value than gold.  Gold is nothing but religion, propped up by tradition. 

Mr Lennon Hendrix's picture

Gold is fundamental in technology.  It defines all metrics of the definition of money.  Considering it is money, and technology is absent without it, precious metals have intrinsic value.

Crimedog's picture

So gold is the only metal that could be used in technology?  Why not platinum?

My point of view is this - while fiat currency simply is a piece of paper, gold is simply a piece of metal.  However, the religion of "greenbacks" is deeply ingrained on modern society.  The world will never go back to a gold-backed system.  Society reached a level of hyper-growth, both economically and demographically, that needs a fiat system to sustain itself.  I don't envision any scenario where if I would use gold to buy anything in the real economy.

Rynak's picture

That a currency is gold-backed - or backed by anything real (instead of "potential", "belief", "promise") - does not mean, that one has to pay with the backing asset itself.

Of course, the problem with "trusts" is transparency.

But yeah, you go back to your nominal hypergrowth in alice's wonderland, while reality plunges.

Mr Lennon Hendrix's picture

Fine.  Use platinum.  Same cos.  Use silver if you like.  All PMs are finite, and price will increase with demand.

As far as the faith based system, this is exactly what I am focused on.  If I told you I had a unicorn ranch, and you came, and I had painted a bunch of horses pink and strung horns on their heads, your kids might believe me, but if you did, you would be stupid.  This is the Fiat Ponzi:  a Unicorn Ranch.

FranSix's picture

"All PMs are finite, and price will increase with demand."

Actually, no.  Gold prices advance in interest rate environments that fall behind inflation.  

And gold is only hoarded by central banks for real reasons, not other PMs. 

Central banks accumulate gold through foreign exchange diversification and lease it out as a matter of course. Very few people at all will take direct deilvery as a commodity, thus you can leverage up the paper market for gold and generate a great deal of currency in transaction.

When physical gold is sold directly into the market, say out of mine production or central bank holdings, then you suddenly generate a great deal of capacity to lend.  The price declines temporarily until leverage takes hold about 100X the value of the gold, and off we go again.

That's how the gold market works.



BoNeSxxx's picture

That is how the gold market works now you mean, right?

I think that when the curtain is pulled back on the fiat system, the gold market may behave in quite a different fashion, no?

That's his point (not to speak for him, of course, he's a big boy)


DoChenRollingBearing's picture

+ 1  Excellent point.

That 100 x leverage is going to be a bitch one day soon.  When people start clamoring for their physical ounces they think they own because they have a scrap of paper (or electrons on a hard disc), then the gold market is going to work VERY differently.

It's the "when" part that gets me.  Not the "if."

RiverRoad's picture

Gold is definitely money as far as central bankers are concerned.