This could mean two things:
The market is still confounding the hedge fund guys. Bloomberg notes that some of the best performing shares in the rally have been those of such companies as Netflix (NFLX), Bank of America (BAC), and Sears (SHLD). What do they have in common? They were targeted by short sellers, many of them at hedge funds. Now these pessimists have been forced to buy shares of the companies to cover their losing positions. ”Hedge funds are at least part of the underlying strength in the recent move [in the stock market], and it has to do with not only buying stocks, but first and foremost covering,” says Michael Holland, founder of Holland & Co. in New York. ”It’s been a brutal time to be on the short side.” Hedge funds have finally gotten it right. There is good reason for hedge funds to be more bullish on stocks, whether they are coming to this realization belatedly or not. This month, Fed Chairman Ben Bernanke reaffirmed his position that the economy is growing stronger. He also said the Fed would keep interests rates at record lows through late 2014 to make sure nothing changed. That has weakened the demand for U.S. Treasuries, which have lost 1.4 percent of their value so far this quarter. So where else do you put your clients’ money if you run a hedge fund—where else right now but the stock market?
Read More: Bloomberg Businesweek