Here's What I Think

Have you heard the name Dan Loeb before? Loeb is the manager of Third Point, an $8.8 billion dollar hedge fund. I've had the opportunity to sit down at the offices and have dinner with a few hedge fund managers and some Wall Street folk that have been on Wall Street since the 1950's, others in my family either work for very large Wall Street firms that all of you have heard of (two letter ticker that starts with an M) and another that works on a Black Box High Frequency Trading program for an independently wealthy person. None are in Loeb's class, but the hedge fund business is very simple, it's best characterized as "Sheep". There are a few leaders, but the rest spend their time following someone like Dan Loeb's 13-F filings and copying his moves.

There's a really simple reason for why most hedge fund managers own all the same assets and it makes my job easier when they all decide to start buying the same thing or selling the same thing, the signals are really clean and unbelievably strong. The reason they are sheep is because no one wants to lose their manager's position that can be worth hundreds of millions of dollars, no one wants to be the one who sticks out like a sore thumb when compares to the rest o the pack.

There's a reason the S&P is up 12.5% for the year and only 8% of hedge funds are beating the S&P! That's right, only 8% are doing better than the S&P and then you have to take out the fees, usually 2 and 20 which refers to a 2% management fee and a 20% performance fee, any money made above the high water mark has 20% sent to the fund so if your hedge fund made $200,000 for you this year, they take $40k plus another 2% of whatever your total portfolio is, even if that $200k only represents a 5% gain for the year!

In any case, Dan Loeb's biggest loser right now is none other than AAPL...

My guess is this came out somewhere between 1pm and 2 pm today, probably specifically at 1:52 pm today when the market all of the sudden changed without any sort of negative divergence at all.

AAPL would have been sold by all the sheep hedge funds and because of margin calls, they'd have to sell a lot of other assets.

I'm pretty sure this is exactly what happened to the market today.

Now how many of you can remember how long I've been warning about AAPL?