This is all the more surprising when you remember that just over a year ago it was considered somewhere between foolish and daring to suggest Tesla could be a buy given short sellers’ grip on the narrative around the company.
Cancel culture practised by the sometimes less-sophisticated masses is the last thing endangered short sellers need as their numbers dwindle.
Their primary marketing and sales method to investors in justifying higher fees is that they can offer downside protection in falling markets. That’s all well and good, except for the fact US equity markets just stormed higher over one of the worst years of economic contraction in history.
The golden days of two and 20 management and performance fee structures at independent hedge funds are long gone.
Even the higher-than-normal fee structures at long-short funds are under pressure. These funds were first popularised by mainstream asset managers as they were permitted by regulators for offer to retail investors, with the higher fees justified by the more sophisticated ability to buy options for downside protection.
Recently one of these funds and one of the ASX’s largest ever retail raisings, the $1.33 billion L1 Capital Long Short Fund, spectacularly lost its Tesla short bet as the narrative around it flipped.
Elsewhere, activist short funds and independent researchers are having a tough time given the wall of stimulus and low-fee passive index fund money flowing into shares.
In Australia on October 29 Soren Aarndahl’s activist hedge fund Blue Orca published a research report claiming Seek was a wildly overvalued, no-growth platform, carrying a dangerous amount of debt.
It had a point and the stock fell 6 per cent to $21.51 before entering a trading halt.
On Tuesday Seek’s shares closed at a record of $29.14, leaving Blue Orca high and dry for now.
WiseTech’s short sellers have also lost the debate despite its founder selling shares hand over fist during the second half of 2020, and Afterpay’s short sellers have been regularly humiliated.
The ongoing struggle of the short side is something to watch, especially if 2021 proves another stimulus-induced year of strong returns for financial markets.
But nowhere is the power of cancel culture stronger in financial markets than in the rise of bitcoin. History is written by the victors and the narrative around bitcoin is now written almost exclusively by its owners and promoters in a mainstream media increasingly prepared to accept this.
Bitcoin’s self-interested institutional marketers also have an army of retail speculators keen to get rich quick and cancel any dissenting views over the digital currency’s credibility or direction. This makes sense given bitcoin lacks intrinsic value today.
But question bitcoin on social media and you’ll be cancelled and labelled a Luddite. The narrative that it’s going higher is not to be questioned, even if the wild price swings suggest it’s a speculative bet relying on short-term sentiment more than anything…