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Short sellers bombed again in latest market timings beta

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(Bloomberg) — One by one, short sellers are forced to give in as market expectations grow at a slower pace from central bank tightening.

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Whether in stocks or bonds, bearish bets are taking a hit as US data begins to reverse the fallout from sharp interest rate increases by the Federal Reserve. The dovish trend by the Reserve Bank of Australia on Tuesday is also raising speculation that policy makers may be about to loosen their hawkish stance.

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Short sellers are forced to pull back during the best two-day stock rally in the US since April 2020, after raising bearish bets in one of the longest periods in years. While the recent rebound in risk appetite has missed naysayers, some analysts, including Goldman Sachs Group Inc. and Bank of America Corp. The defeat has not yet taken its course.

“Investors are looking for any sign they can find that central banks will ease their tightening cycles,” said Lauren Goodwin, economist and portfolio strategist at New York Live Investments.

This comes after the S&P 500 rose more than 2.5% for the second consecutive session. At the center of the rally are the top short-selling stocks, as tracked by Goldman Sachs Group Inc. , which jumped nearly 6% as a group on Tuesday, taking losses for those who bet on it.

The increase is causing sharp pain for professional speculators, who raised their short positions last month as the S&P 500 fell to its lowest levels in a bear market. Over 11 consecutive sessions through Thursday, Morgan Stanley’s hedge funds consolidated short positions against exchange-traded funds, bringing their total exposure to their stocks to a 13-year low.

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The return of stocks, after the S&P 500 suffered its worst September in two decades, is also a headache for the rule-based funds that have boosted bearish stock bets as volatility rises and the market loses momentum. Trend followers such as commodity trading advisors, for example, showed last week that their stock position is approaching the bottom observed at the height of the 2008-2009 global financial crisis, data from JPMorgan Chase & Co. shows.

Short selling continues to be extreme from CTAs to hedge funds,” said Andrew Brenner, head of international fixed income at NatAlliance Securities.

While short sales have helped skeptics like hedge funds do better during the bear market in 2022, they have at times become a source of stress when a sudden stock rally puts pressure on.

It’s not just stock investors who get caught.

Hedge funds increased their already high net short positions in US Treasuries last week, delivering a rout that sent 10-year yields up 4% for the first time in more than a decade.

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The shift has fueled a brief price action, with US government bonds already under pressure amid dwindling liquidity and fears of a massive interest rate hike by the Federal Reserve. The 10-year yield rose to its highest level since 2008 last week, before easing back after the Bank of England resumed buying long-term bonds.

Yields then fell further on Monday after a weaker-than-expected US factory gauge reading, falling for a third day to 3.62% on Wednesday in Asian trading.

small investors

The stock bounce is also punishing retail investors, who, based on JPMorgan estimates, last month dumped most individual stocks in data going back to 2015.

Against this backdrop, companies from HSBC Holdings Plc to Credit Suisse Group AG are holding to the view that the S&P 500 may not yet have bottomed as US stock prices still do not fully reflect the risks of higher earnings rates and valuations.

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Valuation risks for the benchmark index “will continue well into 2023, and most of the downside in the coming months will come from slowing profitability,” threatening to push the S&P 500 index to 3,200 in the fourth quarter, according to Max Kettner, HSBC’s head of multi-asset strategist.

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MicroStrategy is at its lowest level since 2020 after the sales were revealed

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(Bloomberg) — Shares of MicroStrategy touched their lowest level since August 2020 after the enterprise software company, which in recent years has been known as the largest buyer of bitcoin, revealed its first sale of the token.

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The stock fell 1.1 percent to $136.63 on Thursday, down 75 percent this year. Bitcoin rose less than 1% to around $16,590 and is believed to have fallen 64% since the start of the year.

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In a filing on Wednesday, MicroStrategy said it acquired approximately 2,395 Bitcoin between the beginning of November and December 21 through its subsidiary MacroStrategy, and paid out approximately $42.8 million in cash. It then sold 704 of the tokens on Dec. 22 for a total of about $11.8 million, citing tax purposes, before buying another 810 of them two days later.

Matt Malley, chief market strategist for Miller Tabak + Co. Step down as CEO. This news means they don’t seem to want to do that anytime soon.”

Overall, MicroStrategy held about 132,500 bitcoins worth over $4 billion USD as of December 27th. The company paid an average purchase price of $30,397 per bitcoin.

“Given MicroStrategy’s $2.4 billion in leverage, we believe the company may have a lot of leverage over Bitcoin, and may face some liquidity risk,” Jefferies analyst Brent Thiel wrote in a note on Wednesday. Thill has an “underperform” rating on the stock and a price target of $110.

Over the years of the pandemic, MicroStrategy has become well known for its Bitcoin takeovers, largely led by Saylor. Earlier this year, Saylor stepped down from that role and now serves as CEO at the company and continues to lead its bitcoin strategy.

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MicroStrategy was trading around $120 before Saylor first announced the company’s Bitcoin purchases in 2020. The stock reached an all-time high of $1,315 in February 2021.

(Updates to include the stock’s closing price in the second paragraph.)

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Bankman-Fried May File Petition in New York Federal Court Next Week Before Judge Louis Kaplan By Cointelegraph

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Former FTX CEO Sam Bankman-Fried is set to appear in court on the afternoon of January 3 to enter a lawsuit over two counts of wire fraud and six counts of conspiracy against him related to the collapse of cryptocurrency exchange FTX, according to Reuters. mentioned on December 28, citing court records. Bankman-Fried will appear before District Judge Lewis Kaplan in Manhattan.

Judge Kaplan was appointed to hear the case on December 27 after the original judge in the case, Ronnie Abrams, Resigned herself because of connections between FTX and the law firm Davis Polk & Wardwell, where her husband is a partner. The company provided advisory services to FTX in 2021.