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“These bullish and bearish readings are the highest and lowest, respectively, since the inception of our survey in May,” said Sol Waksman, founder and President of BarclayHedge. “The enthusiasm is not surprising. Our Hedge Fund Index shows consistent gains in 13 of the past 14 years, and hedge funds are firmly on track for a profitable 2010.”
About 54% of hedge fund managers are bearish on the 10-year Treasury note, while only 14% are bullish. These readings are the highest and lowest, respectively, since May. In contrast, 39% of managers are bullish on the U.S. dollar index, while only 13% are bearish. These readings are also the highest and lowest since May. Meanwhile, 23% of managers aim to lever up in the coming weeks, the largest share in six months.
“Managers are betting aggressively on the economic recovery,” explained Vincent Deluard, Executive Vice President at TrimTabs. “While markets spent most of 2010 oscillating between overblown fears of a double-dip recession and irrational exuberance about a V-shaped recovery, an inflationary growth consensus has emerged heading into 2011. Moreover, the fact that every sentiment measure under the sun shows sky-high confidence could indicate that investors are a touch too jubilant. The bandwagon might be overly packed.”
About half of managers attribute higher Treasury yields to expectations of higher inflation and stronger economic growth, while only 4% cite the negative debt implications of the extension of the Bush tax cuts. Meanwhile, a majority of managers feels precious metals are the most overbought asset.
“We are a little surprised to see precious metals top the list,” noted Deluard. “Gold funds generally took in more money in 2009 than they have received in 2010, and our flow data suggests bonds are much more overbought than metals. Mom and pop have been dumping bond ETFs and mutual funds for two months, but only after they poured a staggering $705.5 billion into them between January 2009 and October 2010. If a bubble is to burst in 2011, we believe bonds are the strongest candidate.”
The TrimTabs/BarclayHedge database tracks hedge fund flows on a monthly basis. The TrimTabs/BarclayHedge Hedge Fund Flow Report provides detailed analysis of these flows as well as relevant topical studies. Click here for further information.
BarclayHedge is a leading hedge fund data vendor and one of the foremost sources for proprietary research in the field of alternative investments. From its origin as a research specialist and performance measurement firm, BarclayHedge has developed complete client services as a publisher, database and software provider, and industry consultant.
TrimTabs Investment Research is the only independent research service that publishes detailed daily coverage of U.S. stock market liquidity--including mutual fund flows and exchange-traded fund flows--as well as weekly withheld income and employment tax collections. Founded by Charles Biderman, TrimTabs has provided institutional investors with trading strategies since 1990. For more information, please visit us here.
