Watch Out for the “Anti-Growth” Trade!

[Joanne98]

Now that most big hedge funds have completed their race to get neutral, they are holding raucous in-house debates over placing size bets on a double dip recession. This would involve reversing every trade that I have been recommending for the past 18 months, in which the hedge funds have also been running gargantuan positions, flipping from longs to shorts.

On the table are new shorts in commodities, energy (USO), emerging markets (EEM), the industrial white metals of silver (SLV), platinum, (PPLT) and palladium (PALL), junk bonds (JNK), and corporate bonds. This view has traders going long the dollar and the yen (YCS) and shorting the euro (FXE), pound (FXB), and the commodity producing Australian (FXA) and Canadian dollars (FXC). Long positions would be established in the dollar, Treasury bonds, and volatility (VIX).

This is not exactly a low risk trade, as it goes contrary to every long term global macro trend currently in place. If you get the double dip recession that Europe, China, and more recently, British Petroleum (BP) are trying their best to deliver, they hit a home run. If the recent diabolical market action turns out to be just a vicious head fake, then they would be selling into a hole and getting killed on the next whipsaw. They don’t call these guys the Masters of the Universe for nothing.


After watching silver (SLV) and palladium (PALL) get absolutely creamed today, I just want to reiterate my warning (click here at http://www.madhedgefundtrader.com/April_28__2010.html ) the market now had vastly higher levels of risk, that there will be no place to hide in the following sell off, it is only those who believe in the Easter Bunny who think diversification will protect them, and that cash is best hedge of all. There were more 200 day moving averages broken this week that there are national Rifle Association bumber stickers at a Tea Party rally.

Stop losses and tight risk controls are the order of the day (click here for that advice at http://www.madhedgefundtrader.com/April_20__2010.html ) when “de-risking” is the dominant investment strategy, and bitter margin clerks are in the driver’s seat. For proof this is happening, you need look no further than the euro/yen cross, that great indicator of global risk taking, which has been in an absolute free fall for the last four weeks, to a gut churning ¥112. (For an explanation of why this is important click here at http://madhedgefundtrader.com/February_11__2010.html ).

It hasn’t helped that credit markets have once again ground to a halt. The IPO market has gone comatose once again. The cheerleaders at CNBC have gone back to looking like they have just been kicked in the balls.

You only need one ticker on your screen right now, and that is for the S&P 500 (SPX). There is now more open interest in the SPX puts than there was during the Lehman aftermath. Talk about closing the barn door after the horses have bolted. Technicians are talking about the first line in the sand at 1045. But I think that level offers all the support of a wet taco. If that doesn’t hold, then you can look at 950, which would give us a neat 22% pull back from the top.

http://www.zerohedge.com/article/watch-out-%E2%80%9Canti-growth%E2%80%9D-trade

[upi402]

1. CNBC

These folks look straight into the camera and do this crap to fellow Americans.

Thank the cloud beings for Dylan Ratigan for coming to the light. I expect more.

from your link- http://madhedgefundtrader.com/February_11__2010.html ;
"2) Brace yourself for the impending gold shortage. Gold shortage? Yup. With the launch of a flurry of dedicated gold ETF’s last year, total ETF holdings of the barbaric relic, now exceed total world production."

Just trying to cover my butt with only 2 hands here.