Hedge funds brace for ‘severe rupture’ in markets as valuations diverge from fundamentals

Hedge funds are getting ready for another slump in stock markets after growing uneasy that surging prices do not reflect the economic problems ahead.

“The markets are priced to perfection,” said Danny Yong, founding partner at hedge fund Dymon Asia Capital in Singapore. “The stability in equity markets does not reflect the job losses and the insolvencies ahead of us globally.” Other hedge fund managers have expressed concerns about the sharp rebound in stocks from the March lows. Stanley Druckenmiller, a protégé of George Soros who stepped back from managing outside money a decade ago, recently said he expected a wave of bankruptcies and that a V-shaped economic recovery was a “fantasy”.

Despite a slew of bleak economic data — including more than 40 million Americans filing for unemployment benefits and an expected record contraction in the eurozone economy in the second quarter — the S&P 500 has surged almost 40 per cent since its trough in March, leaving it down just 3 per cent for the year.

Morgan Stanley said in a recent note that its hedge-fund clients hold a net short position of about US$40 billion in Euro Stoxx 50 futures. Global macro hedge funds have sharply reduced their exposures to stocks this year, according to JPMorgan Cazenove. The so-called 'Fed put' — the concept that the central bank will step in to support markets — may be reaching its limits

Hopefully GoldenTree asset management goes bankrupt so they can stop financing postmedia losses

🖕🖕🖕🖕🖕🖕 No way!!!!! Money printer go brrrrrrrrrrrrr!!! stonks only go uppppp!!!!!!!! Buy the dip!!!!!!

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