US Giant Shock, Empty Carnival, 7 Days To Gain Over 50 Billion U.S. Dollars

Since the end of February, US stocks have fallen sharply, but the bears have welcomed a bumper harvest season.

In March 4th, the latest data released by S3 Partners, an American financial analysis company, showed that the spread of the S & P 500 index was down by about 10% from the global spread of the new crown pneumonia epidemic. In the past 7 trading days, the US short sellers gained a total of US $51 billion 300 million by market capitalization.

In the highlight of the short selling effect, the US stock market added more than US $15 billion short positions to US $848 billion during -3 3 February 24th.

"Mainly short and short strategy, event driven strategies and procedural trading hedge funds have participated in this round of short selling banquet." A Wall Street macroeconomic hedge fund manager told the twenty-first Century business reporter. A number of short selling strategy aggressive hedge funds, in the past 7 trading days net value rose more than 15 percentage points, greatly relieved the previous poor performance of the redemption pressure.

He said frankly that during the sharp fluctuations in US stocks, it highlights the investment value of hedge funds. But the good days of selling short profits may not last.

Igor Dusanivskiy, managing director of S3 Partners, admitted that at present, about 15 billion US dollars in short positions have been added, most of which are aimed at short-term profits.

A number of hedge fund managers revealed that after 3 days of the US Federal Reserve's emergency rate cut of 50 basis points, some hedge funds have begun to cut short positions and make profits.

"Hedge funds believe that although the Fed's interest rate cut is not enough to alleviate the economic impact caused by the spread of the epidemic, the short-term rise in US interest rate cuts is likely to erase the hard won short selling profits, so they chose to settle for security." Nathan Sheets, a hedge fund PGIM strategist, pointed out to reporters.

It is worth noting that the drop in US stocks also made Tesla short, a little "breathless" - because of the surge in Tesla's stock market, the loss of Tesla's institutions once lost more than $8 billion.

"In the past 7 trading days, Tesla shares fell, and the short selling organization recovered about 1/4 of the loss, about $2 billion." Igor Dusanivskiy said.

Diversification of short selling strategy

Despite the sharp fall in the US stock market in the end of February, a lot of gains were made, but many Wall Street hedge fund managers admitted that the short selling operation was not too high.

"At the end of February, the VIX panic index hit 41.15 of the highest level since February 2008, and a large number of events driven, strategic trading and trading hedge funds were on the move, increasing the short positions of the S & P 500 index futures." The above macroeconomic hedge fund manager said. In most hedge fund investment models, the rise and fall of the VIX index is highly positively related to the short selling intensity. As long as the VIX index is high, the selling price will be substantially increased.

In the view of Nathan Sheets, the most profitable short selling at present is the most aggressive hedge fund with short selling strategy. For example, after the VIX index exceeded 40, hedge funds used 15% capital to sell the S & P 500 index with 5 times leverage, and the cumulative net value rose more than 20 percentage points in the past 7 days. But its short selling strategy is not complicated, it is to take a lot of money to focus on selling Berkshire, Boeing, Disney, Amazon, Nye and other highly weighted stocks.

Compared with selling returns through short selling index or heavyweight stock, some quantitative investment hedge funds get excess returns through precise sniping stocks.

A quantitative investment hedge fund manager told reporters that they focused on the impact of the spread of the epidemic on different industries, and found that energy, automobile, aviation and other industries demand the fastest decline, and the largest drop in the performance of related enterprises, so most of the funds were used to short sell stocks in these industries with high valuation or poor performance.

At present, the strategy of sniping stocks has also made the hedge fund very profitable. For example, the recent US gas producer Tellurian Inc. fell more than 76%, and the short seller's average yield was more than 110%.

The empty gamble of those left behind

More and more hedge funds have chosen to settle for security in the face of heavy selling returns.

"After 3 days of the Fed's emergency rate cut of 50 basis points, we have cut about 30% short positions." An event driven hedge fund manager told reporters. Originally, they planned to cut 50% short positions in one breath, but the Fed's emergency rate cuts failed to stop the US stocks from falling, so they decided to "hold 70% short positions and observe one or two days".

He admits that even if the US stocks continue to remain low for some time, they will continue to cut more than 80% short positions, because the investment sentiment in the entire financial market has shifted from panic to calm, which is not conducive to short selling strategy to continue to profit.

Igor Dusanivskiy said that most of the new short positions are mainly based on short-term profits. Once the US stocks stabilize and rebound, they will quickly fill in the blank.

However, there is no shortage of money chestnuts in financial markets.

A short selling profiting hedge fund manager told reporters that he would not cut most of his short positions. They judged that the US Federal Reserve's interest rate cut would not effectively alleviate the risk of global economic stagnation caused by the spread of the epidemic. At that time, the US stock market would also suffer from a greater downward pressure.

He pointed out that at present, the Wall Street hedge fund has disputed the effect of the US Federal Reserve to cut interest rates. Some agencies worry that the rate cut can not effectively boost economic activities and market confidence, because the economic stagnation brought by the spread of the epidemic is no longer the solution of monetary policy.

Rey Dario, founder of the bridge water foundation, pointed out that the current central bank's interest rate cut and liquidity increase measures may push the risk asset prices to a certain extent at the cost of interest rate approaching zero, but these measures will not substantially stimulate people who do not want to spend to spend, thereby driving the economic recovery.

"This is also the main reason why we dare to retain most of our short positions. Once the spread of the epidemic has led to serious economic activity and the increase in corporate profits, the US stocks will be overestimated, which will easily trigger a new round of short selling." The above short selling profiting hedge fund manager said.

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