With hedge funds set to report their record, 7th year of market underperformance [6](and a flurry of meaningless gibberish hitting once again overnight as to the purpose of hedge funds, here is the punchline: in a world in which an "all-in" Fed is Chief Risk Officer, there is no need to hedge, and when Fed loses controls no hedges will save you) who would have thought that the only right trade is doing precisely the opposite of what the "smart money" herd says it the right trade (aside from the usual place [7]).
Well, more and more we hope, because as Bank of America points out, following the announcement of the Fed taper in December 2013, and subsequent end of QE (for now), now that excess liquidity is over, and with it excess returns, what characterizes the market is not the gains, but the losses. To wit: "YTD investor performance has been plagued by “non-stop pain trades” as liquidity expectations weaken and investment horizons shorten. For example, July/August saw the S&P 500 media sector lose $100bn of market cap in 15 trading days, as well as significant losses in Asian and Emerging Market currencies following the Chinese yuan devaluation."
[8]
Expect much more "pain" with or without accompanying trades in the weeks and months to come.
