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Wall Street’s Advice To Clients: “Take Advantage Of Retail Investors Relative Inexperience”

Courtesy of ZeroHedge View original post here.

With war erupting between Wall Street's "legacy" professional investors (headed by, say, hedge funds and Warren Buffett) and retail daytraders (the army of Robinhooders whose self-appointed king is the trading community's celebrity du jour Dave "I am smarter than Buffett" Portnoy), traders on both sides of the divide are contemplating how to capitalize best on this escalating feud especially since the Goldman basket of "retail favorite" stocks have vastly outperformed the broader S&P, not to mention most hedge fund indexes.

One Wall Streeter who has believes he has figured it out is Evercore ISI's Rich Ross who, in a note to clients today, has the following advice:

  • Retail Investors: Take advantage of their relative inexperience which creates opportunities for professional investors. Retail participation was also high in ’99 when the NASDAQ rose 99%.

Indeed, and most traders today recall what happened in 2000 when the furious Nasdaq crash turned off an entire generation of retail traders from the market, only to hook them back before the housing bubble burst.

That said some are already taking his advice, with Hertz via Jefferies seeking to capitalize on the relentless BTFD mentality of the retail daytrading hordes by launching the first ever Initial Bankruptcy Offering geared almost exclusively at the ravenous appetite of the Robinhooders who have once again made Hertz the day's most popular stock on the trading platform.

And while any other time the money would be squarely on Wall Street winning the war, the fact that the Fed's nationalization of capital markets which has effectively eliminated downside risk and made it possible for even teenagers to rack up impressive profits chasing momentum, not to mention has led to dreadful performance by hedge funds who still trade on such anachronisms as "fundamentals", "cash flow" and "data", prompts another question: perhaps it is retail investors who are taking advantage of Wall Street pros who have no idea how to trade what is no longer a market, but a policy tool used by central bankers.

So as we wait to see who is the winner in this increasingly epic feud, Ross had some other advice to his clients, ironically most of which boils down to precisely the same thing that retail investors are doing every day: Buy the Dip.

Below we excerpt from the rest of his trading recos to "non-retail" investors:

  • Sum: “Buy the Dip. Stay long secular growth leaders, and now tactically cover and get long the lambasting in cyclical value laggards” across REIT’s, Regionals, Energy, Airlines, Banks and BA after a 3 Day Bear Market down to well-defined support, as Corrections, Recessions and Rotations which used to take weeks and months now take hours and days, and the Bullish ’09 blueprint continues to “show us the way literally to the day (below)” calling the bottom in March, consolidation in May, and the one and only 9% correction in June. In sum, buy the dip and have a nice weekend.
  • S&P: The ’09 Blueprint continues to “show the way to the day” and strongly suggests we “buy the dip” before the rip.

     

  • Motation: Kroger was the only stock up on Thursday as the lashing in laggards reached ramming speed with the XOP -22%, XAL -29%, BKX -17% and Russell -11% in just 3 sessions, as AMZN and AAPL led a secular rush to new all-time highs surging 3% and 1% over the same period while Momentum (MSZZMOMO) surged 25% after an epic parabolic collapse. “Stay long the secular, and cover and get long the laggards again.”
  • Macro: Remains consistent with a cyclical bottom and conducive backdrop to risk taking even as the Dollar and VIX have bounced off of obvious support while Spreads have widened some after a parabolic collapse.
  • Banks/Yields: Both go higher and I am a buyer after Yields pulled back to support at 68bps post the Fed taking Banks and Value down with them.
  • Energy/Crude: Both go higher and I am a buyer as Energy equities crashed and burned into obvious resistance at the 200ma, but are now better to buy along with the commodity after a 3 Day Bear Market back down to support.
  • Airlines/BA: Both are again better to buy on the pullback to support after the JETS went from Namath to Sanchez in 3 sessions

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