Why the Market Could Go Nuclear


falling behind

Some of the skeptics are circling again as we hang around the highs.  Sell stocks they say.  Long is wrong they say.  I beg to differ and calling tops is not my thing anyway.  I do have a couple reasons why we could indeed rip into year end though.  We have about fourteen weeks left.

There are enough macro troglodytes around that keep pissing in the well and some folks  actually listen to them.  I don’t listen to them, you shouldn’t either.  They would rather lose money than admit they are wrong anyway. They don’t get the market, let them ramble.

No one likes to lag, play catch up or feel stupid. Right now the big funds are under performing . The SPX is positive by about 8% and the legendary money mangers aren’t. Here is what the best of the best are doing.

Here is the current state of affairs over in hedge fund land. Taken from the NY Post yesterday.

With late August numbers starting to trickle in, some of the biggest stars are barely breaking even. Others are in the red in a year when the broader market is up 8 percent.

Take David Tepper, who turned in an astonishing 42 percent in 2013 to take home $3.5 billion.

That’s not likely in 2014 as his hedge fund was only up 2.3 percent through July, the latest numbers available. The fund fell 1 percent that month.

Richard Perry, another veteran star, is up a mere 1.3 percent through Aug. 22 — after falling 1.4 percent this month. Perry Partners gained 22 percent in 2013.

Leon Cooperman, always a bull market darling, had gained 2.25 percent for the year through July. His Omega Advisors fund rose 30 percent in 2013.

Nelson Peltz of Trian Partners is faring a bit better. His fund gained 6.6 percent through Aug. 22, with 1.9 percent coming in August. But last year, Trian was up 40 percent. That earned him a spot on the Top 20 list — alongside Tepper — published by HSBC.

Jeff Altman’s Owl Creek, which rose to fame last year with a 48.6 percent gain, has done an about face. The former top 20-hedge fund fell 3 percent through Aug. 22, with 2 percent of the loss in August.

Hedge fund legends Paul Tudor Jones and Louis Bacon are also in the red. Bacon’s main fund is down 5.5 percent through Aug. 14, after booking a 1.3 percent loss the first two weeks of the month.

Jones, meanwhile, has fallen 3 percent this year, following a .4 percent loss in the first three weeks of August.

Bottom line these guys will have to pay to play over the next fourteen weeks.  Performance chasing is in their DNA and they have no choice.  It could get silly to the upside.

Reason #2 —The “Cycle” is in your favor.

My bud Ryan Detrick, the master of market stats points this out:

“Entering super bullish part of Prez Cycle. Next 6 mo up close to 100% of time past 16 yrs.”

I’ll take those odds.

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