Finance

Michael P. Regan is a Bloomberg Gadfly columnist covering equities and financial services. He has covered stocks for Bloomberg News as a columnist and editor since 2007. He previously worked for the Associated Press.

(Updated )

As any naked guy at a baseball game will tell you, all good streaks must come to an end. 

And that -- streaks -- was sort of the theme of the week in financial news. So ride along with us as we review the highlights and extend a long streak of Gadfly Trade of the Week columns stitched together with dubious themes. In other words, we're all going streaking

At Apple, the Cal Ripken of revenue growth, a streak of 51 consecutive quarters of sales growth ended. The disappointing earnings report vaporized $43 billion of market cap in a mere hour. As if that wasn't enough, Carl Icahn piled on afterward by saying he dumped his Apple shares after almost three years. So now Apple is in the midst of a new streak -- a seven-day share-price slump, its longest in three years. They say the second-happiest day of a boat owner's life is when he buys the boat, and the happiest day is when he sells it. An inverse phenomenon must exist for chief executive officers when it comes to Carl Icahn: The second-worst day of their lives is when Icahn buys a stake, and the worst is when he dumps it.  

Tipping the Apple Cart
Carl Icahn said he dumped his shares in Apple this week after holding a stake for almost three years
Source: Bloomberg

Icahn, in an interview on CNBC, said he sold his shares because he sees a risk in Apple’s relationship with China, which shut down Apple’s iTunes Movies and iBooks services recently. As a result, he kept alive another prevalent streak: the well-established trend of prominent Western investors staring suspiciously at the black box that is China's policy and economy and finding reasons to worry. However, with the luck they've had lately, we half expect to see Xi Jinping start handing out Apple products like Oprah during sweeps week. You get an iPhone! And you get an iPhone!

To wit, take a look at how well some other recent China speculations have played out. As Dan Loeb pointed out, his Third Point fund wasn't the only one to get burned by piling into short bets against the nation's currency as well as commodities and companies exposed to China's economy. And this kept alive a nice long streak of very vibrant writing in hedge-fund letters to explain less-than-vibrant returns. The 2.3 percent drop in Third Point Offshore Fund came amid one of the most "catastrophic periods" in the last two decades, the letter said, as market-neutral strategies became a "hedge fund killing field" and "there is no doubt that we are in the first innings of a washout in hedge funds and certain strategies."  

Whoa, major buzzkill, Dan. You're making us worry about hedge funds about as much as we worry about Jay Z's prospects for an anniversary gift. But he's right, as Saijel Kishan and Josh Fineman's article pointed out: Hedge funds had net outflows of $16.6 billion in the last two quarters and 979 funds closed last year, according to Hedge Fund Research.

It all calls into question how long another significant streak can last, namely the seven-year stretch of growth in assets under management: 

Seven-Year Itch
Hedge fund assets under management have grown every year since 2009, growing 11% last year even as global equities declined
Source: BarclayHedge

Especially in market-neutral strategies, where the crowds heading into this year seems to have broken the fire code:

Crowded House
Assets under management in equity market-neutral funds surged last year
Source: BarclayHedge

Elsewhere in streaking this week, the sell side's streak of shipping headcount off to lower-rent towns continues unabated, with Citigroup sending 1,000 more jobs to Florida. The streak of stories portending a gloomy fortune for our precious millennials is still going strong, as is the streak of pieces where millennials #humblebrag about the expensive college they attended by complaining loudly about their massive student debt load. Finally, the long streak of anonymity enjoyed by the authors of the bears' favorite blog, ZeroHedge, ended in flames when Tracy Alloway and Luke Kawa revealed the three people who make up the split personality that is the pseudonymous writer Tyler Durden while a circular firing squad erupted. 

On a long enough timeline, it seems, the survival rate for all streaks drops to zero. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

(Corrects spelling of Cal Ripken's name in third paragraph.)

To contact the author of this story:
Michael P. Regan in New York at mregan12@bloomberg.net

To contact the editor responsible for this story:
Daniel Niemi at dniemi1@bloomberg.net