'Long FAANG' Is Most Crowded Trade On Earth For 5th Month In A Row As World Piles Into USA Today's High Conviction Summer Fry Cook Reco

Grab your balls (and a life preserver) and let's make a fortune!
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Last week, venerable financial journal (and paper you only read when you're having a stale muffin from a La Quinta Inn continental breakfast bar) USA Today had some sage investment advice for college students who want to "turn [their] summer job pay into a fortune".

That advice can be summed up as follows: buy FANG stocks.

Here's the rationale behind that recommendation:

Educational investment app Rubicoin calculated how much money a worker earning $10 an hour in a 25-hour workweek for 13 weeks each summer the past four years would have if they invested half of their before-tax pay equally on Aug. 31 each year in four FANG stocks — Facebook, Amazon, Netflix and Alphabet, Google’s parent company. Half of the annual summer pay adds up to $1,625 per summer.

That $6,500 investment since 2014 would be worth $15,899 today, according to Rubicoin, citing closing prices on May 28.

There are a lot of problems with that reco, not the least of which is that USA Today is giving investment advice in the first place, but beyond the inherent absurdity, the most obvious criticism is simply that first-time investors who are determined to sink 100% of their disposable income into U.S. equities should never buy just four stocks, let alone four stocks in the same sector.

Unlessin' your summer job "saving lives at the beach and slinging eggs" (to quote the article) brings you into contact with someone who is in possession of inside information and can thus guarantee your results (i.e., tell you how to cheat), well then the best way for you to invest your lifeguard money in equities is just to buy SPY or else send your money to Jack Bogle. That is just the end of that story. It's not debatable.

For those interested in my extended (and highly amusing) critique of the USA Today post mentioned above, do feel free to read (or reread) "A Completely Serious USA Today Tells College Students To Parlay Summer Jobs Into FANG ‘Fortune’".

Once you wade through the humor and tales of "arbitrage" activities I definitely do not endorse and definitively never engaged in while I was in college, that linked post eventually gets to the point which, crystallized, is this:

This is the most crowded trade in the world according to BofAML’s most recent Global Fund Manager survey, which represents something like $600 billion in AUM:

LongBUYITRobotsBiglyBigLeagueCrazyFutureNoPriceIsTooHighGrabALifeVest

That was meant to be a warning to all the lifeguards and egg salesman out there who might be inclined to take USA Today's advice, but upon reflection, I suppose it could also be seen as validation for the FANG thesis. Something like this: "Well, everyone else is obviously in on this, so why can't I 'put five on the $20 sack?'"

That goes double when you consider the fact that if you actually read those BofAML surveys, it's not uncommon to find instances where asset managers appear to be making bets on the very same trades they say are the most crowded.

So you know, why not lifeguards and "egg slingers"?

Fast forward to Tuesday and the newest edition of that same BofAML survey is out. You'll never guess what the most crowded trade (still) is:

FANG

There you go - it's "Long FAANG + BAT" again.

That makes five months in a row and as you can see, the margin (i.e., survey participants' conviction with regard to calling that the "most crowded trade") is the highest it's ever been. Maybe that's a reflection of inflows from lifeguards since last month or anticipation thereof.

To all the prospective FANG millionaires out there reading this on their iPhone with one hand while working the Wendy's fryer with the other, what I would encourage you to do is look back up at that chart and note what the last trade to hold the "most crowded" title was prior to FAANG's five-month reign at the top.

It was "short volatility".

And while I don't know how many lifeguards and fry cooks were long XIV, what I do know is that the Target manager crowd was all-the-fuck-in and if you want to know how that ultimately worked out, just ask Seth.

Oh, and if you're irritated by my completely disingenuous and wildly misleading comparison of a short volatility ETP to Amazon and Netflix, well then do feel free to send an e-mail to my support staff at: "kissmyass@heisenbergreport.com [Allow 3-5 business days for a reply]

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