What My Gnome Is Hearing
* The Bull Market movie is in reverse today…
“Buyers live higher and sellers live lower.”
– Kass Diary
As I have mentioned market structure has changed meaningfully in the last decade.
Passives (ETFs) control float and the Pods (at multi-strategy Hedge Funds) control the marginal price.
That said, high above the Alps my Gnome is hearing that several large Pods have blown up and have been liquidating today — especially in high-beta and high-yield positions. (That is partly the reason for my covers in private equity, Nvidia ($NVDA) and CoreWeave ($CRWV).)
This, in turn, causes (passive) outflows, which forces passives (at the margin) to sell (their overowned and overweighted names).
Thus, today’s market schmeissing.
We learned from the Leopold (Situational Unawareness) and by past occurrences that forced selling often makes a bottom.
However, today’s selling, by multiple Pods seems less likely to produce a “V” type reaction/recovery.
Position: None
