Dan Loeb turns bearish, according to his latest letter to investors.
Dan Loeb billionaire investor and founder of Third Point (whose AUM at June 30 was $17.7 billion) has joined a growing list of elite Wall Street titans who have become risk-averse and net sellers of stocks.
“Dan Loeb turns bearish is a growl that might be worth taking seriously”
Dan Loeb turns bearish is a growl that might be worth taking seriously
For the last few years, Dan Loeb was managing his $17.7 billion dollar fund as an ardent risk on bull. Dan Loeb was one of the few hedge fund managers, along with Carl Icahn who bet on a Trump rally and profited handsomely.
But in the last five months, the then contrarian bull writes about a market shift occurring in Q1.
So Dan Loeb turns bearish would probably come as no surprise to those of you who follow this investor. Dan Loeb is today risk averse and rotating his portfolio away from stocks.
Dan Loeb turns bearish and when heavyweight bulls morph into bulls that is often a good indication of the end of a bull market cycle.
“We have delivered our portfolio, reduced our tech exposure meaningfully, and grown our short book. We expect to be net sellers over the next few months if markets rally…”, wrote Dan Loeb to his latest letter to investors.
“We have delivered our portfolio, reduced our tech exposure meaningfully, and grown our short book. We expect to be net sellers over the next few months if markets rally…”
Dan Loeb turns bearish when Third Point’s latest quarter results were unimpressive. October’s seasonal market sell-off was most anticipated (including by me) but surprisingly for hedge funds manager who prides themselves as being ahead of the investing herd many funds were caught wrong-footed in this recent stock-sell off.
Indeed, October has been the worse month for the industry since 2011 with many funds hemorrhaging profits.
Dan Loeb turns bearish and he sheds light on risk-averse outlook by recounting a show called, “The Good Place” which is aired on America’s national broadcaster, NBC.
Dan Loeb uses the analogy of “The Good Place” to explain why so many others like him were caught out by October’s stock market rout.
In The Good Place, the audience is led to believe that a group of people who led righteous lives arrive in a utopian village where they are given the homes of their dreams to live in, are matched with their soul mates, and can eat endless amounts of frozen yogurt and never get fat.
Eventually, the characters learn that their “soul mates” were chosen in error and that the angel played by Ted Danson was actually an evil demon who concocted the scenario as a way to torture them. Turns out, the “Good Place” was actually the “Bad Place.”
“Looking back, it has become clear that we and many investors thought earlier this year that we had arrived at the “Good Place” in terms of market conditions” – Dan Loeb
Dan Loeb turns bearish, he explains why using the analogy of “The Good Place”
“Looking back, it has become clear that we and many investors thought earlier this year that we had arrived at the “Good Place” in terms of market conditions. In January, fuelled by tax cuts and synchronized global expansion, PMIs rose, economic growth estimates were revised upwards along with corporate earnings, and stocks surged across the board, especially growth stocks. Then, in February, volatility spiked to record levels and stocks dropped precipitously after a series of technical dominoes fell into place. After October’s market rout, it seems that the environment this year ought to have been dubbed the Bad Place Market”, said Dan Loeb to investors.
Dan Loeb turns bearish during almost the same time that Goldman Sachs, the US investment bank published its most bearish report in recent years.
The bank warned recently that while there are several mitigating factors, “stocks may be about to enter a sustained bear market”. Goldman is warning not to be lured into stocks because of a sharp rebound. This is to be expected during the “volatile period” that follows the final year of a bull market before a protracted and painful slide into a bear market.
Dan Loeb turns bearish is further evidence that maybe this aging weary bull market, the longest in living memory is finally laying down and coming to an end.
The last year of every stock market cycle has typically been characterized by bouts of volatility, wild swings as the bulls and the bears battle it out for control. Bull markets typically end with the optimists, the bulls throwing in the towel, capitulating with exhaustion after the animal’s spirit has been beaten, eventually, the great bull lies down and dies. Central bank permitting this bull market is on its last legs, this could be the last year of this cyclical bull market, which is typically known as the volatile period.
Nomura strategist said that not even buy back chatter is enough to excite the bulls. “Death by papercuts” market is further sapping willingness to deploy risk despite a “cleaner” positioning footprint and the return of the “buyback bid,” said one strategist.
“Will the Fed come to the rescue this time?”
Dan Loeb turns bearish so does he then believe that the world’s central bank by default the Fed will no longer come to the bull’s rescue this time
Perhaps that also explains why Israel Englander extends the lock-up period. But what about quantitative easing (QE) 4….. QE to infinity?
Will the Fed come to the rescue this time?
In a backdrop of Trump administration’s chest banging trade war with China perhaps the Fed has what they have always wanted, their fall-guy in situ. As Trump talks tough on trade the Fed keeps on doing quantitative tightening QT. Slowly 4 trillion dollars of assets on the central bank’s balance sheet is being unloaded. As stocks tank and yields soar raising the cost of borrowing the talking heads on mainstream, the history books at school could then dub it the Trump Depression.
With the perpetrators off the hook, the mess of QE, QT, ZIRP will then be swept under the carpet.