Latest / Felix Nikolas Prehn's Podcast / Why Hedge Funds Are Selling NOW

Transcript

Why Hedge Funds Are Selling NOW · Felix Nikolas Prehn's Podcast

• 0:00
  Speaker 1: Felix here, live from a hotel room in Manila.
• 0:02
  Speaker 1: Let me walk you through what just happened.
• 0:06
  Speaker 1: Hedge funds have just started to sell, and what are they selling?
• 0:11
  Speaker 1: That's really the important thing.
• 0:12
  Speaker 1: And why are they selling?
• 0:13
  Speaker 1: And what does it mean to you and me, the average retail investor out there?
• 0:17
  Speaker 1: How can we make money out of this?
• 0:19
  Speaker 1: First things first, come and join my life trading training on Tuesday, 10 am, new York time, where I will walk you through how I set up trades, when I exit trades.
• 0:30
  Speaker 1: I give you all the rules.
• 0:31
  Speaker 1: I give you the whole thing.
• 0:33
  Speaker 1: Come and join me, it's completely free.
• 0:35
  Speaker 1: Felixfriendsorg slash webinar.
• 0:37
  Speaker 1: Grab yourself one of the seats.
• 0:38
  Speaker 1: So let's get onto the why.
• 0:40
  Speaker 1: And then we go back to the hedge fund story, and I've got some notes on my phone.
• 0:43
  Speaker 1: I hope you don't mind.
• 0:45
  Speaker 1: First of all, yes, positioning is kind of bonkers.
• 0:49
  Speaker 1: We keep going up and up.
• 0:51
  Speaker 1: Every day is a new, all-time high, and that can make you feel like well, a little scared, right, like, is this gonna keep going?
• 0:58
  Speaker 1: Is it brilliant?
• 0:59
  Speaker 1: Is it like a reminder of the last bubble?
• 1:03
  Speaker 1: And, yeah, I think it kind of is, but I think it's gonna go further.
• 1:07
  Speaker 1: And what makes me think that?
• 1:09
  Speaker 1: Well, I get comments on some of my videos of people saying I'm an idiot for not buying Nvidia and that kind of thing, and that's awkward.
• 1:17
  Speaker 1: But people, it shows people's exuberance, people's overconfidence in their decision, whereas a lot of the time we should just acknowledge that we get lucky like part of managing your money.
• 1:30
  Speaker 1: You get lucky, but if you show up in enough places you will eventually get lucky more often.
• 1:34
  Speaker 1: So there is a bit of effort and skill and also definitely luck in there, right.
• 1:38
  Speaker 1: So I think that's one of those six.
• 1:40
  Speaker 1: So that kind of gives me an indication.
• 1:41
  Speaker 1: Maybe we're pretty, pretty overly long, right, but it doesn't feel quite like 1999 yet or like 2021.
• 1:50
  Speaker 1: I think we're getting there, but we're not actually quite there yet.
• 1:53
  Speaker 1: So that's not actually why hedge funds are selling off.
• 1:56
  Speaker 1: Positive is also that we're seeing the rally is broadening, so we're seeing European stocks recovering despite terrible economy in Europe.
• 2:05
  Speaker 1: So that's positive, because the broader it is actually, the longer it typically lasts till it does kind of pop.
• 2:12
  Speaker 1: Momentum is insane.
• 2:14
  Speaker 1: So hedge funds at the moment have essentially stronger momentum to be bullish than at any time since 2000.
• 2:24
  Speaker 1: That tells you something, right.
• 2:26
  Speaker 1: It tells you all right, it's gonna go higher, but for how long?
• 2:29
  Speaker 1: And that's always the question.
• 2:31
  Speaker 1: I gave you an indicator on that last week, gladly walking through that again.
• 2:36
  Speaker 1: And AI is the excuse for it all.
• 2:39
  Speaker 1: And there's a lot of good stuff obviously around AI Make stuff more efficient, earnings per employee are gonna go up, and so on.
• 2:47
  Speaker 1: But you also need to be careful.
• 2:49
  Speaker 1: A lot of people are using AI as an excuse to say, oh, this is why we're cutting jobs.
• 2:55
  Speaker 1: Now you are actually cutting jobs because your sales are pretty appalling and your company is mismanaged.
• 3:00
  Speaker 1: Paypal, right.
• 3:01
  Speaker 1: They are not cutting jobs because of the one note of AI.
• 3:05
  Speaker 1: It's actually it's just been a mismanaged business, and there are a lot of those.
• 3:10
  Speaker 1: I mean, paypal is still a pretty decent business in my view, but there are a lot of companies out there that are just using this as an excuse.
• 3:15
  Speaker 1: So be careful with that.
• 3:17
  Speaker 1: Just because people are sacking people doesn't mean the company is getting better or more efficient.
• 3:21
  Speaker 1: It could just be that it was a crummy business off late.
• 3:25
  Speaker 1: Now what about rate cuts?
• 3:27
  Speaker 1: Okay, inflation data was pretty mixed in January.
• 3:31
  Speaker 1: The economy is still pretty strong.
• 3:34
  Speaker 1: Labor market data is so manipulated we don't really know where it sits, but the labor market is still reasonably tight.
• 3:40
  Speaker 1: Why?
• 3:40
  Speaker 1: Still largely because during the COVID period there was very, very little immigration and that made the labor market tighter.
• 3:48
  Speaker 1: And now there is very little legal immigration and that is an absurd amount of illegal immigration and that is, at least on some fronts, on the lower skilled jobs, going to ease the labor market somewhat.
• 4:03
  Speaker 1: Now the Fed won't cut in March.
• 4:05
  Speaker 1: Some people are even saying they might raise rates if February data comes in higher.
• 4:11
  Speaker 1: I doubt it.
• 4:12
  Speaker 1: I think if you look at that headline, I think it's sort of a Domburg Bloomberg clickbait headline and I would never do such a thing and basically 5% of the market expects a rate increase or something.
• 4:25
  Speaker 1: So it's just like the three crazy people in the corner.
• 4:28
  Speaker 1: So I wouldn't really take that too seriously.
• 4:30
  Speaker 1: But we may not get a cut in May.
• 4:32
  Speaker 1: We may get it in May, we may get it in July.
• 4:34
  Speaker 1: They may push it back because they don't really have to do much as long as the economy stays strong.
• 4:39
  Speaker 1: If the economy starts to falter, they have to cut, because great cuts also take time to take effect in the real world and therefore they need to act quite swiftly.
• 4:50
  Speaker 1: But as long as the economy looks strong and it's likely to because it's government led.
• 4:55
  Speaker 1: Yeah, it's basically communism on overdrive, where the government is spending all the money and the private sector is cutting costs, and that obviously has nothing to do with certain people trying to get reelected no, no, nothing to do with that.
• 5:11
  Speaker 1: So what are hedge funds doing?
• 5:12
  Speaker 1: So hedge funds are selling tech stocks and AI stocks, and you might think, oh, they're going to miss the top of the rally.
• 5:20
  Speaker 1: And yes, they will.
• 5:22
  Speaker 1: But they don't care.
• 5:23
  Speaker 1: They make a lot of money and they make a lot of money by avoiding the extremes.
• 5:28
  Speaker 1: They avoid the top of the market.
• 5:30
  Speaker 1: They don't sell into the bottom of the market.
• 5:33
  Speaker 1: They wait for momentum to turn around.
• 5:37
  Speaker 1: So they'll be back when momentum comes down and the market starts coming down.
• 5:41
  Speaker 1: Then they might make money on the way down.
• 5:44
  Speaker 1: But right now is a pretty risky place to buy tech at the easy valuations.
• 5:50
  Speaker 1: If you're short term, if your horizon is 20 years who cares Like?
• 5:54
  Speaker 1: I still buy what I consider to be good stocks every week because I don't really care, because in the long run 10, 20, 30 years this makes zero difference whether I pay a little bit more or a little bit less.
• 6:03
  Speaker 1: But if you have a shorter time horizon.
• 6:05
  Speaker 1: You're going to want to think about this a lot more carefully For my trading.
• 6:08
  Speaker 1: I need to think about that, but I only need to think about the next two weeks or so.
• 6:13
  Speaker 1: Now that's room service, so I better open that.
• 6:15
  Speaker 1: So what I would say to you is be cautious, don't get foam out.
• 6:18
  Speaker 1: We've been there before, look at 2021.
• 6:21
  Speaker 1: Don't make the same mistake again and come and learn with me tomorrow how we make money in a week or in two weeks, how we can build that income stream in a really simple manner.
• 6:31
  Speaker 1: Felix Fensseldorf slash webinar.
• 6:32
  Speaker 1: I'm going to enjoy my curry.
• 6:34
  Speaker 1: Thank you for watching and tuning in.