Wednesday, August 22, 2012

Hedge Funds Get Stupid On Debt And Apple

Hedge funds are once again exploring new territory in the endless undiscovered continent known as Stupid Land.  They are so impoverished for market-beating ideas that they are trading U.S. Treasuries like mad.  Some of these money managers are indeed mad (in the sense that they should be locked up in mental institutions) and their clients are even crazier for giving them money.  Passing Treasuries around like hot potatoes with the Fed holding rates at zero is like playing Russian roulette with a machine gun.  When something sparks a run on the dollar and short-term rates shoot up, a whole bunch of hedge funds will find themselves stuck with bonds that will plummet in value overnight with no way to unload them.  The margin calls from their prime brokers will bring back 2008 all over again.

Hedgies who aren't even smart enough to flip Treasuries are launching the dumbest move of all:  going all in on Apple at the height of its market dominance.  The most valuable company in the world can be easily dethroned by cheap Asian smartphones.  Retail investors used to be the dumb money but now hedge funds have claimed the title.  This phenomenon of institutions following retail investors over a cliff at high speed should be preserved for posterity.

Thanks for nothing, hedge fund idiots.

Full disclosure:  No position in hedge funds or AAPL at this time.