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Hedge funds have doubled their net shorts of the S&P 500 in the last three weeks, reports...

  • Wednesday, June 6, 2012, 10:08 AM ET
    Hedge funds have doubled their net shorts of the S&P 500 in the last three weeks, reports SocGen. They're at record highs with euro shorts, and have turned net sellers of copper. "Waning support" makes the S&P and Nasdaq "highly vulnerable," says SocGen. Actually, it's the hedge funds that are vulnerable, writes Brendan Conway.
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This news story has 24 comments:

  •  
    Thanks Hedge Funds!

    Buy the dip, sell the rip
    6 Jun 2012, 10:16 AM Reply Like
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    The way many of the hedge funds have performed, them going net short might signal a turn in the market and a sign to buy!
    6 Jun 2012, 10:20 AM Reply Like
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    That's what JP Morgan thought: $17 billion loss. Be careful!
    7 Jun 2012, 12:28 AM Reply Like
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    I think that the Hedge Funds are going to get screwed if the FED announces a new QE program and that is very likely. They have to staying power and will be covering the shorts if the market moves and I wonder what covering such large shorts can do ... hmmm.
    6 Jun 2012, 10:26 AM Reply Like
  •  
    hedge-fund = herd-fund
    6 Jun 2012, 10:50 AM Reply Like
  •  
    That was my thought as well.
    6 Jun 2012, 02:13 PM Reply Like
  •  
    most hedge funds are no smart than ordinary people
    6 Jun 2012, 12:38 PM Reply Like
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    You have obviously not met many hedge fund managers. Most serious hedge funds are run by a team of individuals usually with post graduate degrees from Ivy League schools. These ordinary folks are also paid extremely well (usually in the millions) for their ordinary knowledge.

    Also, one last thing, they tend to use proper grammar whether writing in their native language or not. I'm just saying!
    6 Jun 2012, 02:54 PM Reply Like
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    That would be why the average hedge fund lost 309% more than the S&P 500 did in 2011 ( SPY: 127.05 to 125.5 = -1.22%, Avg hedge fund -5%, http://seekingalpha.co... ), or lost a collective trillion dollars herding into crude oil at the worst possible time in 2008?
    6 Jun 2012, 06:37 PM Reply Like
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    These would be the frat guys that now rule the world but once were in my easy upper level economics classes required for THEIR major. These would be the same guys that complained endlessly about how hard their economics and accounting classes were. . . There were very few science majors that cross pollinated into upper level business class but I have to tell you, these guys may be cocky, good in sales, and sometimes from old money, but they really are not as exceptional as they would like you to think they are - expect, perhaps, at beer pong. If you think they have your best interests at heart, you are a sucker.
    6 Jun 2012, 07:24 PM Reply Like
  •  
    Nice response. I think underestimating the enemy is a cardinal offense. Calling hedge funds stupid is clearly a misunderstanding of their education level.

    Do hedge funds make mistakes? Yes. But if hedge funds are also BUYING the US Dollar, then they are probably right about the direction of stocks.

    QE3: Is that what the Fed has come to? Becoming Uncle Fed whose job is to spend US tax payers' money to insure a bull market in stocks? So we all feel good?
    7 Jun 2012, 12:32 AM Reply Like
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    If I'm reading James's comment correctly, he taught many current fund manager's in their upper division courses, and wasn't too impressed with many of them. I'll defer to his wisdom.

    Common sense dictates that fund manager's will fall along a bell curve like everyone else. However, a star won't be following the herd, and when most can't keep pace with SPY, they would be more productive flipping burgers.

    Few things are more dangerous than an educated fool, who will hang on to the bitter end, because he *knows* he's right.
    7 Jun 2012, 05:32 AM Reply Like
  •  
    They will probably get whipsawed around just like last autumn. I suspect we're going to have a lot more volatility over the next several months but will be going lower though not in a straight line.
    6 Jun 2012, 05:24 PM Reply Like
  •  
    Then buy the vix. Works out pretty well.
    6 Jun 2012, 07:33 PM Reply Like
  •  
    Today was a short covering rally, but it is a good bet that some of the shorts are still short, and that today's explosive action itself was a sell signal.
    6 Jun 2012, 06:20 PM Reply Like
  •  
    whitehawk,
    Good comment. Yes it was very likely a short covering based ST rally. The decline in the dollar of almost 1% was a big factor as well. The headlines have been saturated with begging and pleading for Fed & ECB interventions for days now (apparently corporate welfare has no shame). So the bulls were really getting desperate. Even pulled out their "Fed leaker" to try and juice the rumors.

    But the fact is that nothing of substance has been announced and no central bank interventions are likely any time soon. And many corporations are now announcing weaker guidance and lower profit expectations..
    6 Jun 2012, 06:56 PM Reply Like
  •  
    I like your thinking. I was surprised when I saw all the price action! Nearly everything was green. Market is getting tough to call. It seems too early to start buying in (unless you buy a few 52 wk lows).
    6 Jun 2012, 07:35 PM Reply Like
  •  
    I really hope no interventions come, I don't like this so-called correction. Down less than 10%.
    6 Jun 2012, 07:37 PM Reply Like
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    I would not want to be short the market right now. Way too oversold.
    6 Jun 2012, 07:04 PM Reply Like
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    I think what you saw was Benny deliberately hosing anyone who dares to bet against his $4 trillion dollar rally...just as they have been tailpiping anyone who bets on gold vs his inflated dollars.
    6 Jun 2012, 09:50 PM Reply Like
  •  
    Keep those European short positions building, bursting at the seams. Nothing could possibly be better for European-equity bottom feeders.
    7 Jun 2012, 04:49 AM Reply Like
  •  
    Why is it that very few people can comprehend what is going on? The markets are near all time highs and yet the global markets have the worst fundamentals since the inception of capitalism.

    Greed, fraud and corruption are rampant in the financial sector. Moral hazard is at an all time high as everyone knows the Fed is the lender of last resort. Debt in the U.S. is approaching emerging market levels. There are 100 reasons why this market will trend lower over the foreseeable future with the worst case scenario being the end of capitalism as we know it.

    With all due respect, anyone who has a bullish outlook on stocks in general is a moron and deserves to suffer major losses. Just my opinion, Peace!
    7 Jun 2012, 11:41 AM Reply Like
  •  
    All true, but timing is everything. MF Global didn't get killed from making a bad bet. They got killed from getting margin called on a poorly timed good bet.

    If this short term rally doesn't peter out before SPY hits 134, many could get caught in a bull trap. How many bearish funds have the margin and conviction to stick to their guns?
    7 Jun 2012, 05:18 PM Reply Like
  •  
    So true faustius, so true! I remember shorting Countrywide a little over a year before the real estate collapse. It was very painful and expensive to keep that short on even though I knew eventually they would be nearly worthless.

    In the short term, the markets can be irrational but given enough time, they will always come back to their true value.
    8 Jun 2012, 09:51 AM Reply Like
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