Dan Loeb, aka Mr_Pink_esq, Increases Short Hedges Against Run Away Market

There are a lot of things to like about Dan Loeb. For one, he was once an anonymous poster on the Yahoo message boards dubbed Mr_Pink_esq. Truth of the matter is, that poster was largely influential for my writing style and passion about expressing thoughts online. I used to stumble across Mr. Pink’s posts and was captivating by the energy in them, the fuck you style of the prose, and I sought them out all the time. At the time I was short some stock and so was Mr. Pink, so I always looked forward to his rants about how XYZ was barreling towards zero as Mr. Pink and Mrs. Pink sipped on some fine bubbly off the coast of Monaco.

Then there’s this epic piece by Vanity Fair, which I believe marked the beginning of Bill Ackman’s troubles. In it, Dan Loeb poleaxed Ackman in an ‘ill fated’ bike ride to Montauk. Fucking hilarious. “His mind wrote a check that is body couldn’t cash.”

And George Clooney can’t stand him because Loeb had the balls to go after Sony.

Then there’s the decades of outperformance of Third Point, one of the few large funds still relevant in today’s lexicon of market talk. Like many old legacy funds, his recent struggles with the market have been duly noted and derided by all of the debt laden thousanaires on Twitter.

But maybe Mr. Pink has another trick up his sleeve?

Loeb is increasing his bets against stocks, citing chicanery. But it should be noted, he isn’t net short like Dalio — he’s merely increasing some hedges, which is what hedge fund managers should be doing.

“Investors have become increasingly concerned about multiples, particularly since after many years of low rates, there finally was an alternative to equities in the form of relatively riskless two-year money,” he added.

Indeed, the quarter marked a number of changes, with rising bond yields being one of the biggest market movers.

In the years since the financial crisis, the search for yield had forced most investors into higher than normal stock allocations, fueling a nine-year bull market run that had seen few interruptions. However, major indexes have seen multiple dips into correction territory so far in 2018, and allocations to bonds have been rising as government yields have hit multiyear highs.

However, he said an equity short allocation returned 2.4 percent, “and we intend to further increase short exposure to fundamental single names and quantitative-derived baskets in 2018, and less on market hedges to dampen volatility and reduce net exposure.”

Stock pickers such as Loeb generally like periods of market volatility as it presents pricing opportunities.

“Looking ahead, we still see S&P growth in the U.S. supported by fiscal stimulus in 2018,” he said. “We remain focused on maintaining a portfolio that can deliver compelling risk-adjusted returns across market cycles and will opportunistically adjust the portfolio across expected further waves of volatility.”

Loeb said the firm also is watching the economy “to see if a recession, which we don’t think is close, might be getting closer.”