S&P

Earlier today we reported that based on various internal metrics, the market-neutral quant space is suffering one of the most violent deleveraging episodes since the infamous quant blow up in August 2007.

But what is really going on below the surface to force these dramatic moves which may not seem like much to the untrained eye, but to PMs managing 10x levered market neutral funds are earthshattering. For the answer we go to the head of US cash trading at RBC, Charlie McElligott, who has given the most succint explanation yet.

It has been a morning session of two halves.

In Asia, the mood was somber, and stocks fell with the Shanghai Composite (+1.1%) outperforming on another late session binge-fest by the National Team, and the Nikkei 225 (-1.4%), Hang Seng -1%, Kospi -0.2%, ASX -0.6%, Sensex -0.4% and the South Korean Won all down following news of the biggest Chinese Yuan devaluation in five weeks.

Stocks are up - just ignore everything else... "all is well"

One of these things is not like the other... Stocks were panic-bought once Europe closed but Crude, Credit, and Carry crumbled...

Something strange is going on. Heading into the Friday open, in his daily letter to "clients", Dennis Gartman said that in his "retirement portfolio" he was short the market and long gold, to wit:

With the S&P down just about 10% YTD, hedge funds especially of the levered-beta variety have not had a good year; that said, it would be fair to say that many have not had a terrible year either. In fact, as the following table of hedge fund performance by some of the most marquee names shows, while there are certain outliers in the YTD column some 6 weeks into 2016, most of the hedge funds have actually done that, and while most are around the flatline, there are some notable outliers, perhaps most notably Boaz Weinstein Saba which late last year many had left for dead.