Pray...

Record Correlations + Record Low Mutual Fund Cash + Soaring Dispersion = Recipe For Redemption Driven Disaster | ZeroHedge

the past month has accentuated the ability of funds to generate alpha (and even beta) lead to broad reallocation of capital by fund LPs. The will force the en masse selling of winners to satisfy margin calls, exacerbated by record low mutual fund cash "dry powder" positions, and sets the groundwork for even more volatility as all traditional hedging strategies fail. So what is an investor to do in such a confusing environment? Pray... is the short answer. As for the longer one, there is not much that can be done according to Goldman, which in its latest weekly chartology has little if any words of encouragement for both clients and market speculators alike.

Record Correlations + Record Low Mutual Fund Cash + Soaring Dispersion = Recipe For Redemption Driven Disaster | ZeroHedge

And as the redemption requests start piling in, the slow money will be forced to proceed with a rapid liquidation of winning holdings (as gold experienced last week, assuming of course that the CME margin hike had not been leaked). But are mutual funds really going to see  a spike in redemptions? You betcha

Record Correlations + Record Low Mutual Fund Cash + Soaring Dispersion = Recipe For Redemption Driven Disaster | ZeroHedge

We fully expect that the investing community will proceed to sell all of the best performing stocks imminently as this last bastion of cooperative game theory falls apart.

Record Correlations + Record Low Mutual Fund Cash + Soaring Dispersion = Recipe For Redemption Driven Disaster | ZeroHedge

These are just the beginning, as the true severity of record correlation and investing leverage are gradually disclosed.

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