Welcome to the fourth edition of Bullsh*t Research, a fun series of posts that, put simply, amounts to a blooper reel of Wall Street analyst notes. The first three installments are:
- Bullsh*t Research: Inaugural Edition
- Bullsh*t Research: Presidents’ Day Edition
- Bullsh*t Research: French Election Edition
Today’s humor comes from JPMorgan and I have to tell you, I saw this one coming.
About a week ago, one of the bank’s most highly regarded analysts put out a note that suggested the “big boys” had pared bullish bets on equities since December and that a look across fund categories seemed to show a material trimming of exposure in February.
Here’s what I said about that note:
As a (sort of) aside, note that over the past several weeks, I’ve documented the extent to which fund manager beta seems to indicate that the “2 and 20” crowd is all-in. Well, a recent note from JPMorgan’s Nikolaos Panigirtzoglou (who I’ll confess I stopped reading about two years ago when I noticed a perceptible and, I thought, unsupported bullish bias creep into his weeklies) suggests that in fact, some fund categories walked things back last month:
I don’t want to try and draw too many conclusions from that because making the case that funds are paring exposure as a group requires that you look at things “ex-CTA,” which is kind of like saying “well, if you just exclude the one that matters…” But it’s worth noting that if some funds are selling, someone is by extension buying, and if Wednesday is any indication, that someone is ‘Sharon’ (a.k.a. you).
Ok, now here’s what JPMorgan said about that chart last week:
Equity Long/Short hedge funds, Risk Parity funds, and Balanced Mutual funds appear to have all lowered their beta in February vs. the previous month.
Got that? Ok, good, because if you understand the thrust there, you’ll appreciate why the following, released today by the very same JPMorgan, is funny:
Hedge Fund exposure to equities is approaching record levels as Macro and Long/Short Equity funds each exhibit ~95th percentile beta to equities (see Figure 1).
Well which the f*ck is it?
Have Long/Short hedge funds “lowered their beta in February vs. the previous month”, or do “Long/Short Equity funds each exhibit ~95th percentile beta to equities?”, because it sure as sh*t can’t be both.
Cue Captain Picard…