Election Guide for Investors: Get in the Fetal Position
The combination of hair-trigger electronic financial markets, Twitter and wrong information (even when it's unintentionally wrong) is truly the "Three Stooges" of our time.
Consider the slapstick comedy that ensued in Japan on Friday, as told by this Bloomberg First Word report:
Tweets on the retirement of Hiroki Kuroda, a pitcher for the Hiroshima Carp baseball team, caused momentary confusion on social media due to similarity of the pitcher’s name with that of Bank of Japan Governor Haruhiko Kuroda.
Yes, it's hilarious -- except for anyone who may have tried to trade this news and lost their shirt.
So let's all just agree to watch what we tweet from now on, shall we? For example, for the sake of the European financial system's ever-so-fragile contingent-convertible ("coco") bonds, be especially careful about tweets regarding Cleveland Indians Outfielder Coco Crisp -- especially if you're of the opinion that he received the "worst haircut in history."
Anyway, now that this public service announcement is over, let's get on with our Friday tradition of serving up a compilation of the week's hottest financial-news links to disguise the fact we're fresh out of other column ideas.
Maybe you heard, but there's an election coming up! If you've read about all the ways the various result permutations are expected to affect markets, your head may be spinning right now.
So what is the smart money doing?
“We’ve reduced our exposures, we’ve cut some positions and increased some hedges,” Dan Loeb, the hedge fund manager, said on a call discussing results at his Bermuda side gig, Third Point Reinsurance Ltd.
You see, this is one area where Wall Street and the rest of America really can find common ground. When it comes to the election, traders are just like the rest of us, if the quotes from this story are any indication: “I’ve got my bomb shelter ready with battle helmets and water supply," says one money manager; "I’ll be in the fetal position in a corner somewhere hoping it’s going to be over soon," said another money guy.
So what is the Trade of the Week? Obviously it's assuming the fetal position in your bomb shelter. And the data are here to prove it, as the S&P 500 fell for nine consecutive sessions for the first time since 1980 while indexes of market volatility and implied correlations were clearly sounding the air-raid sirens:
However, if you have an uncontrollable urge to trade from your bomb shelter and need to catch up, Phil Kuntz at Bloomberg News has been running a very handy daily doomsday clock to keep track of it all, so take a look at his latest: "U.S. Election Guide to Markets: What to Watch With 4 Days to Go."
We'll wait right here for you until you're finished. Then we'll get back to the other pressing matters at hand, namely
ruthlessly mocking gently ribbing some of the softer targets out there: Wells Fargo and hedge funds.
Elizabeth Warren is writing nasty grams to Wells Fargo and Pennsylvania is writing nasty grams to Wells Fargo and Wells Fargo is writing nasty grams to investors to warn of all the nasty grams they're getting: “The company has responded, and continues to respond, to” all the nasty grams, they wrote. And you have to wonder what kind of nasty grams went flying among the $12-an-hour workers who received emails from a manager who thought her boasts of buying Super Bowl tickets and an $800 pair of sunglasses would inspire them to sell more.
As for hedge funds, sometimes the headlines write the jokes themselves, like Nishant Kumar's look at how quant'ing ain't easy: "Hedge Fund Clients Dump Humans for Computers and Still Lose."
To add insult to hedge-fund injury, Goldman Sachs has chosen to pack all hedge funds' favorite stocks into an exchange-traded fund and charge a measly 45-basis-point management fee. Good luck setting up a Bermuda side gig with fees that size!
Goldman's ETF can get confusing, so pay attention. It's based on Goldman's "Hedge Fund Trend Monitor" reports, which analyze what stocks the funds are buying and should not be confused with the type of hedge-fund monitoring that the FBI has been known to do. The Goldman reports contain what's known as a "VIP List" but that doesn't mean the "very important people" in the hedge fund world (those would be the Chief Redemption Officers who can sweet-talk a pension or insurance asset allocator into leaving money in the fund.) Rather, it's the "very important positions" that hedge funds like to hold.
What positions do the hedge-fund "smart money" 1 like? They seem to love airlines and travel companies at the moment 2 : United Continental Holdings Inc., Delta Air Lines Inc., American Airlines Group Inc. and Expedia Inc. were all held in the ETF at launch.
Hmm, maybe the smart money is on to something here: There's a decent chance many people will be booking flights to get the heck out of the country after this election.
We hear New Zealand is nice.
That moment was pretty much the end of June because of the way hedge-fund 13F filings work, but we digress.
To contact the author of this story:
Michael P. Regan in New York at firstname.lastname@example.org
To contact the editor responsible for this story:
Matthew Brooker at email@example.com