https://www.wsj.com/articles/bets-a...et-rise-to-highest-level-in-years-11587288601 Please paste copy of article to this thread.
Bets Against the Stock Market Rise to Highest Level in Years Among the companies short sellers have targeted in recent weeks are travel-related firms Short sellers have added to their short positions against Marriott and other travel-related companies. Photo: Darron Cummings/Associated Press By Karen Langley April 19, 2020 5:30 am ET Short sellers have revived their wagers against the stock market in recent weeks, taking their most aggressive positions in years. Bets against the SPDR S&P 500 Trust, the biggest exchange-traded fund tracking the broad index, rose to $68.1 billion last week, the highest level in data going back to January 2016, according to financial analytics company S3 Partners. That was up from $41.7 billion at the beginning of 2020 and $41.2 billion a year ago. Short sellers borrow shares and sell them, hoping to repurchase them at lower prices and keep the difference as profit. Among the individual companies they have targeted in recent weeks are travel-related firms, including Carnival Corp., Royal Caribbean Cruises Ltd., Marriott International Inc. and Wynn Resorts Ltd. Those bets come during a wild year for investors who are struggling to reconcile the impact of the coronavirus pandemic on the population and economy. The S&P 500 suffered its fastest drop from a record to a bear market in history—ultimately falling 34% between Feb. 19 and March 23. Its 28% rebound since then has also been brisk, leaving some investors anxious about the strength of the rally when so much remains unknown. “We’ve really seen a significant bounceback in the last three weeks at levels that I think are too quick,” said Jerry Braakman, chief investment officer at First American Trust. His firm recently bet against the Nasdaq-100, on the belief that technology stocks have fallen too little to reflect the probability of a recession. The index is up 1.1% in 2020. “When we see a strong move in one direction, where we think the fundamentals and the news can turn ugly, especially during an earnings cycle, we think that’s an opportunity where we could see a 5,10% selloff again,” he said. Investors are bracing for the possibility of more volatility this week, as earnings reports from companies including Coca-Cola Co., Netflix Inc. and Delta Air Lines Inc. give another glimpse at how the coronavirus is reshaping the landscape for U.S. business. The outsize market swings of late require vigilance from investors who sell shares short because they can face losses when prices rise. Short sellers incurred total mark-to-market losses of $108.8 billion over three days in late March when the S&P 500 surged 18%, according to Ihor Dusaniwsky, head of predictive analytics at S3 Partners. But with the potential for additional declines ahead, many investors have decided that the ability to hedge their portfolios—or simply bet on a selloff—is wise. “Things will go back to normal eventually and these positions will decrease but not until we start seeing less volatility in the market,” Mr. Dusaniwsky said of the rise in short positions against the SPDR S&P 500 Trust. “No one’s going to give up their insurance until they see the chances of catastrophe are in the rearview mirror.” The portion of available shares sold short against the SPDR S&P 500 Trust has also risen, climbing to 27% in early April, the highest level since November 2016 and up from 14% at the beginning of 2020. The increase in bets against the market coincides with a push in other countries to temporarily curb short selling. At times of heightened volatility, critics often argue that the practice exacerbates downward pressure on stock prices. But Jay Clayton, the chairman of the Securities and Exchange Commission, has argued short selling is needed to facilitate ordinary market trading. To be sure, coronavirus has upended entire industries in recent weeks, leaving investors scrambling to reassess the growth prospects of companies from Marriott to Clorox Co. to Amazon.com Inc. to Carnival. With the pandemic devastating global travel, hotel, casino and cruise stocks have been among the hardest hit—and seen some of the biggest additions to the short positions against them. Many hotels and casinos temporarily closed their doors when demand evaporated, furloughing employees and curbing spending plans, and the Centers for Disease Control and Prevention has extended a no-sail order for cruises into July. Short sellers have added a collective $797 million to their short positions against Carnival, Royal Caribbean, Marriott and Wynn over the past 30 days, according to data Friday from S3 Partners. Alex Lee, a San Francisco resident who manages a family sandwich shop in Oakland, Calif., and his wife had previously dabbled in short selling but have recently devoted more attention there. They made bets against Marriott, along with other stocks. “Because of Marriott’s price at the time, it seemed like it had more room to fall and because of its heavy presence in Europe and the United States, we just thought that that company itself would be more vulnerable to falling more,” he said. Over two rounds of shorting Marriott stock in March and April, they made a profit of about $15,000, Mr. Lee said. Marriott recently said about 25% of its hotels are temporarily closed and North American occupancy levels are around 10%. Its shares are down 44% this year. Among the stocks that saw big drops in short positioning in March were stodgy consumer-staples shares, which got a bounce as Americans stocked their pantries to wait out the pandemic at home. “We had a lifetime of trading in the month of March,” said Mitch Rubin, chief investment officer at RiverPark Funds. He said he had previously bet against shares of Kroger Co., Walmart Inc., Clorox and Campbell Soup Co. but covered those positions in late February and early March as it became clear those companies would perform well with consumers sheltering in place. “Their business is healthier than it was before the crisis because the demand for their products has increased,” he said. “The amount of times you clean high-touch surfaces with a chemical disinfectant is going to go up for some period of time, maybe for the rest of our lives.”
Can you do this one? https://www.businessinsider.com/cha...NSIDER - ENGAGED, ACTIVE, PASSIVE, DISENGAGED I'd really like to see what type of real-estate he see's opportunities in. I'm sure he doesn't care about residential be it multi or single. It must be large commercial warehouse space that has potential for automation or server farms. The server farms need the right cities though. Need lots of cheap electricity.
@vanzandt, I clicked on the link & it opened, zero issues here it is Billionaire Chamath Palihapitiya has reaped a 997% return since 2011. He shares his 3-part strategy for today's coronavirus-hit market — and outlines how he's mining real estate for opportunities. It's safe to say that Chamath Palihapitiya — the CEO of Social Capital, chairman of Virgin Galactic, and part owner of the Golden State Warriors — has a knack for making sound investment decisions. "If you're going to allocate capital well over decades, what you really are — better than anybody else — is just a good observer of the current moment in time," he said on "The Pomp Podcast." "It's taken me a long time to sort of practice and refine a tool kit." Last year, Palihapitiya's refined tool kit generated $1.7 billion in cash and cash equivalents for Social Capital through a handful of public investments — Slack, Tesla, Amazon, and Virgin Galactic, to name a few — and a broad base of private holdings. Since the firm's inception in 2011, he's generated a 997% gross internal rate of return — more than triple the S&P 500. Social Capital Palihapitiya is perhaps best-known lately for his polarizing CNBC appearance in which he said that the US government should let debt-laden "zombie" companies get "wiped out" by the coronavirus pandemic. When he was asked whether the US should let the airlines fail, he replied, "Yes." So while it's safe to say that Palihapitiya is steering clear of airlines and other debt-heavy companies, he also has a proactive playbook for figuring out what to buy in their place. To him, it all comes down to three elements: prioritizing needs, asking what won't change, and investigating. Let's take a closer look. 1. Prioritizing needs "What this moment is good at doing is clarifying the hierarchy of needs," Palihapitiya said. "And so the first thing that we're doing — and this is for us, and my team and I, a multiweek process — is just re-underwriting what are our basic needs. And that's what I'm doing right now." 2. What won't change? "I'm trying to ask myself just really simple, kind of basic questions where I can look at my kids, and if I tell them, 'Here are the things that will never change,' they'll be like, 'Yeah, it makes sense,'" he said. "The way that I'm asking the questions right now is, first and foremost: What is not going to change? And there's a bunch of things that are not going to change," he added. "You're still going to go out, eventually. You're still going to travel, eventually. You're still going to buy things offline, eventually. You'll still want to make things that will require energy, eventually. You'll still need to eat; you'll still need to clothe yourself." 3. Investigate "From there — and we've done this because we're a little bit further ahead in some of those sectors that we identified early ... they're not super complicated — but then what we've said is: 'Which companies have now been disproportionately punished, despite basic needs that should remain relatively inviolate over the long arc of time,'" Palihapitiya said. "We've been monitoring, very closely, all sources of alternative data," he added. A big bet on commercial real estate By leveraging data from OpenTable, Yelp, Second Measure, and TomTom, Palihapitiya is able to build an informed perspective and identify patterns within the prevailing economic landscape. As a result of this strategic way of thinking, he now believes thatcommercial real estate is "fundamentally impaired." He pointed to how the video chat in which he's conducting the interview costs nothing and is just as productive as an in-person meeting — all without the exorbitant costs of cross-country flights and lodgings. To Palihapitiya, this is bad news for the sector — but that doesn't mean there aren't opportunities. "There are certain REITs that only service big-box retailers, specifically Walmart, Amazon distribution, and groceries," he said. "Now they've seen 50% drawdowns as well because you throw the baby out with the bathwater when things like this happen. And so we've been going bottoms up in certain REITs, literally looking at property by property, trying to figure out — are these things valued fairly or reasonably." Palihapitiya clearly thinks that real-estate investment trusts invested in the types of properties that service big-box retailers will be able to survive and prosper going forward. Although Palihapitiya doesn't provide specific names, investors looking to mirror his strategy may want to consider Prologis (PLD), Duke Realty (DRE), and Terreno Realty (TRNO). All three invest heavily in real estate for big box stores. "You got to be a worker in moments like this, a humble worker," he said. "It is excruciatingly boring, numbing, time-consuming — but in it is where you'll find, I think, the nuggets." He added: "But that's what we're doing: We're prioritizing needs. We're asking ourselves: 'What won't change?' And then we're looking at things — and essentially what that leads us to is a bunch of offline businesses or hybrid businesses."
Hey thanks. He's wrong on the REITS that cater to the big box players however. At least I think so. Yeah its nice to have anchor tenants, but all those spaces in between would be an area of concern to me. They won't go empty in decent areas, but grocery chains and WMT's etc are spread out over various economic demographics. If he wants a REIT ... $PLD is the one I'd buy going forward. https://www.prologis.com/ That's where the growth will come from (eventually), not retail strip centers with one or two anchor tenants. No growth there and municipalities are gonna keep taxing the spit out of them. Just my opinion. Edit: on second thought, looking at a 23 year chart here... I don't like it. It'll see the $70's again. Might not be a bad short play tbh.
If you visit Asian cities, many of their equivalent "malls" have big box anchors + mostly restaurants instead of mostly retail shops. Difficult to socialize by video and eat online. Even the "big box" has restaurants within the box.