Hedge Fund Bet Turns Sour As Retail Recovers

Bloomberg reports that shorting the CDS index composed mostly of retail mortgages has posted a +8% gain this year, causing pain for hedge funds who took the short side of the trade. These indexes have been rising together with the SPDR S&P Retail ETF (XRT), which is at an important support level:

Source: Bloomberg

These hedge funds would love to see XRT broke this trendline, taking the two CDS indexes with it.

Disclosure: We don’t have any positions in XRT.


Is Real Estate Finally Bottoming?

An interesting development is taking place on this chart:

Source: Bloomberg

The ratio chart (relative strength) of Global Real Estate versus Global Equity seems to be “bottoming”. What is different from the previous attempt in 2017 is that this ratio line has already crossed the 26-week moving average, which has been a pretty good indicator of previous trend changes. How this plays out is an unknown, but there is a good chance that until rates are not increasing dramatically, we’ll see a pullback to the previous support level.


Disclosure: We have no positions in RWO.