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The pain trade for institutions is if the market keeps melting up
It's very interesting - Goldman has a piece out today that the trade that will hurt institutions the most is if the market keeps melting up!!!
If the institutions have already reduced exposure and leverage and also have bought downside protection, then it's quite possible the trend moving up will continue - as when did you ever remember a crash occuring when all the insitutions were ready and prepared. Most crashes occur after euphoria and panic buying - and based on this piece - we haven't seen that blow off top yet.
Via Zerohedge:
This is consistent with the reading from GS Prime Brokerage:
- a) Last week, the GS Prime book saw the largest $ net selling in four months (-1.9SDs), driven by short sales outpacing long buys 10 to 1. Both Single Names and Macro Products (Index and ETF combined) were net sold and made up ~70%/30% of the $ net selling.
- b) Overall book Gross leverage fell -1.5 pts to 238.4% (52nd percentile one-year), while Net leverage fell -1.7 pts to 84.5% (32nd percentile one-year).
- c) Fundamental L/S Gross leverage fell -1.1 pts to 172.9% (18th percentile one-year), while Fundamental L/S Net leverage fell -2.2 pts - the largest decrease in more than three months - to 63.3% (36th percentile one-year).
This is also consistent with AAII survey which showed more bears than bulls for the first time this year or CNN Fear and Greed Index = 22 reading "extreme fear". Also institutional global wall street "inboxes" were hit with "EXTREME NEGATIVE GAMMA FLIP" emails last week which added to the negative sentiment/quick macro shorting of IWM/EEM, etc.
My plan is to continue holding these stocks (this portfolio is close to the Commonstock one I have but it also includes my IRA assets), and I like being able to categorize the holdings:
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