Hedge Funds Really Reaped That Whirlwind - Dealbreaker

Hedge funds haven’t had the best time in these worst of times, as their skepticism of the post-COVID-collapse stock-market rally has kept them from reaping the benefits thereof, broadly speaking. That’s bad enough. But the worst part is that those huge initial losses are their fault, too.

Andrew Hauser, the BOE’s executive director of markets, said on Thursday that hedge-fund trading strategies in U.S. government debt morphed into “stress amplifiers” in March, when fund managers raced to meet rising margin calls….

“Initially these trades were conducted quietly. But as time went on, their speed and size –- running to hundreds of billions of dollars –- began to overwhelm dealers,” Hauser said at an event hosted by Bloomberg. Hauser called this development a “classic doom loop.”

Well, maybe that’s not exactly the worst part. The worst part may be having to publicly eat crow over the situation.

“When Covid hit, I was pretty much of the view that there was a good chance that the credit bubble had finally burst and the unwinding of that leverage would take years….”

“Well I’ve been humbled many times in my career, and I’m sure I’ll be many times in the future. And the last three weeks certainly fits that category,” he said.

No, wait: The worst part is definitely having to watch this guy rub your nose in your wrongness.

“The market got it right,” CNBC’s [Jim] Cramer said on “Squawk on the Street” on Friday. “The big hedge fund guys who told us that this was going to be the highest and worst and most dangerous since 1999, well they made an ill-advised prediction….” Cramer, instead, is listening to the CEOs of beaten down industries for guidance on where the market is headed. Cramer said they are seeing “pent up demand.”

They know nothing!

Hedge Fund Bets Made March Market Chaos Much Worse, BOE Says [Bloomberg]
Stanley Druckenmiller says he’s been ‘humbled’ by market comeback, underestimated the Fed [CNBC]
Blowout jobs report shows ‘big hedge fund guys’ got it wrong and the market was right, says Cramer [CNBC]

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