To the vast majority of the movie going world The Great Gatsby is a fantasized glimpse of a bygone era seen through the lens of a star-struck protagonist. The opulence is overwhelming and serves only as a metaphor of nation's corrupt dreams.
To hedge fund managers operating in a bull market the movie just looks like summer in the Hamptons. Nick Colas of ConvergEx Group says the steep price hedgies are willing to pay for the right to gaze wistfully at the green light is flashing a red light for investors.
Colas says the cost of renting a house in the Hamptons is an indicator, not just of how well New York is doing financially, but also how the big money ballers are going to spend their summer. Spoiler alert! It's going to be lonely in the canyons of Wall Street.
"Let's face it, a lot of hedge fund managers are the guys who rent these houses," Colas explains. "If they're spending...$600,000 or more to rent them, where are they going to be this summer? At their desks churning the market or out in the Hamptons trying to relax a little bit?"
Hedge funds famously underperform the broader market but this year a 10% gain has almost been a lay-up. If you're running a billion dollars and still getting away with taking 20% of the upside that's $20 million of income, a pretty good year by most measures.
All of this seems absurd to outsiders. Beaches in the Northeast are rocky sanddunes. The place is packed and spotting Billy Joel in a bathing suit is less exciting than you may think. Regardless of it all Colas says a good portion of the titans who could otherwise be buying stock market dips are going to be preoccupied with soaking up rays and seeing who has the biggest boat.
Colas himself lays out what this all means at the end of the attached video:
"The bottom line is if you've been invested long you've made some pretty coin so far this year. Do what the professionals do: take some off the table, enjoy those gains and recognize that we've had a really strong run."
- Private Equity & Hedge Funds