Skip to main content

Hedge funds rush to unwind short bets.

 Hedge funds wrong­footed by a sharp surge in stocks this week rushed to exit los­ing bets on fall­ing

Trader

mar­kets at the fast­est pace in years. Equity mar­kets have risen sharply this year, led by many of the spec­u­lat­ive stocks that were clobbered hard­est dur­ing 2022’s global sell-off. Many of the funds that profited from the rout have found them­selves poorly posi­tioned for the rebound, which has recently accel­er­ated as investors sensed that interest rates were close to peak­ing in many large eco­nom­ies. The scale of hedge fund buy­ing, which helped fuel a 3.3 per cent jump in the Nas­daq index on Thursday, eclipsed that seen in Janu­ary 2021 when retail investors co-ordin­at­ing their actions on for­ums such as Red­dit sent the price of GameStop and other meme stocks rock­et­ing, inflict­ing huge losses on some funds.

Funds closed their bets primar­ily against US stocks but also against European com­pan­ies. Bets against stocks that had pre­vi­ously been fall­ing for an extended period were «under MAX pres­sure», Gold­man wrote in a sep­ar­ate note on Thursday. «We saw explos­ive move higher» in soft­ware stocks, «driven by con­sist­ent hedge fund cov­ers all ses­sion,» it added. The bank estim­ated on Thursday that quant­it­at­ive hedge funds lost about 1.3 per cent that day, their worst day in more than six months.

Among stocks that have stung hedge funds this year is online car retailer Carvana, which fell 98 per cent last year but is up 200 per cent in 2023. The rally in stocks that were hard hit in the previous year «has likely provided a big tech­nical tail­wind for the non-prof­it­able tech uni­verse and has been hurt­ing the sys­tem­atic com­munity», wrote ana­lysts at Gold­man.

www.sba.tax

Labels:

Comments

  1. Carl6 February 2023 at 12:25

    I have a friend that bought into Carvana heavily when its price was falling. He didn't get much shares when it was at 98% low but he bought a lot along its way down and can now take out his initial money (if he wants) and still be left with a lot of profit.

    ReplyDelete
    Replies
    1. Maxwell6 February 2023 at 13:28

      Being scared when the market is down makes you do stupid stuff and make bad decisions. When the market is low, don't sell. Try to buy then. When it's high, don't buy. Sell then.

      Delete
  2. Damon6 February 2023 at 14:40

    @Maxwell If our emotions didn't get the best of us we would all (or a lot of us) be very rich by just doing what you've just said.

    ReplyDelete

Post a Comment

Cloud Bookkeeping

HS2 cost cuts new routes and add delays.

 Trans­port depart­ment offi­cials have begun work on «Project Sil­ver­light» sug­gest­ing the high­speed rail scheme might face four addi­tional years of delay. The planned High Speed 2 rail line faces fur­ther delays of up to four years and more cuts to the project under plans being drawn up by min­is­ters to rein in its bal­loon­ing costs. The extra delays to the coun­try’s biggest infra­struc­ture project would mean that it would not be com­pleted until as late as 2045 — 12 years after ori­gin­ally planned. «This is a func­tion of infla­tion; we are hav­ing to find huge sav­ings because the cost of everything the depart­ment is already doing will have become so much more expens­ive by then,» said one gov­ern­ment offi­cial. In Octo­ber, the FT repor­ted that the Treas­ury had asked HS2’s man­age­ment team to identify poten­tial cuts or «scope reduc­tions» to the high-speed line. Trans­port depart­ment offi­cials have sub­sequently begun work on Project Sil­ver­light aimed at fi...
4 comments
Read more

Small business will be excluded from fraud law.

  Min­is­ters are plan­ning to exclude small busi­nesses from anti-fraud legis­la­tion by nar­row­ing the scope of a crim­inal offence tar­get­ing com­pan­ies that fail to pre­vent eco­nomic crimes. MPs and anti-cor­rup­tion cam­paign­ers had hoped the gov­ern­ment would seek to amend the eco­nomic crime and cor­por­ate trans­par­ency bill to ensure the new offence covered all com­pan­ies. The plans to limit the scope of the amend­ments will also dis­ap­point those who had hoped the legis­la­tion would remove key hurdles to the pro­sec­u­tion of white-col­lar crime. A new «fail­ure to pre­vent» offence for fraud would bring it in line with exist­ing sim­ilar cor­por­ate offences for bribery and tax eva­sion. At present, pro­sec­utors need only prove that organ­isa­tions lacked «reas­on­able» or «adequate» con­trols to pur­sue the offence in bribery and tax eva­sion cases. «It would be much more sens­ible for the gov­ern­ment to provide strong guid­ance for SMEs on what these pro­ce...
3 comments
Read more

Doubt on CS's collateral.

  Credit Suisse provided an emergency $140mn loan to Greensill Capital based partly on invoices to companies that deny ever doing the business stated on the documents. The Swiss bank provided the loan in October 2020, less than five months before the collapse of Greensill, a supply chain finance firm that counted former British prime minister David Cameron as a senior adviser. Invoices issued by metals magnate Sanjeev Gupta’s Liberty Commodities and sold to Greensill formed part of the collateral for the loan, according to documents seen by the Financial Times and people familiar with the transaction. Yet several of the parties named on the invoices have told the FT they did no business with Liberty. GFG has consistently denied any wrongdoing. Credit Suisse’s loan had a clause dictating that the collateral value had to be equal to or greater than the $140mn borrowed. The terms of the debt agreement only allowed invoices on Green-sill’s balance sheet to count towards this tally if t...
2 comments
Read more