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Why We’re on the Slow Boat to Nowhere
After speaking to a gaggle of economists, portfolio managers, and traders the last few days, I’ve had one of those “Eureka” moments, as the markets have shown their hands. Those that delivered the dramatic, heart stopping moves last year, like stocks, commodities, oil, precious metals, and junk bonds are on the slow boat to nowhere. Last year’s wall flowers, like currencies and their crosses, will trend nicely, delivering plungers some serious coin.
What’s more, I think these trends, or non trends, will continue for the next several months. That means that the S&P 500 (SPX) will remain around a tedious 1050-1111 range, and that implied volatilities for relevant options will continue to bleed to lower levels. The VIX is an outright short here.
This market is a portfolio manager’s worst nightmare, and a trader’s dream come true. Zero interest rates assure that we aren’t going to crash any time soon, and flagging economic data guarantee that we are not blasting out to the upside. They, the nimble and click happy, can confidently sell into every rally and buy each dip. Selling out-of-the-money strangles, last year’s suicide trade, could be this year’s steady earner. They say markets have to climb a wall of worry. This one has to climb Mount Everest.
Commodities (FCX) , oil (USO), and precious metals (GLD) are showing the same indecisive behavior. The cross trades I have been recommending, long Aussie/euro, Canadian/euro, and short the euro/yen, have been delivering reliably all year.
I have also been able to wrest away a couple of points from the 30 year Treasury bond markets (TBT), (TBF). The March futures peeled back from a 119.5 high on February 5, fell to 116.5. They then promptly screamed back up to 119.25, stopping me out of my short .
This is all happening because the markets are now transitioning from last year’s blistering 5.9% Q4 GDP rate to the more somnolencent 2%-2.5% growth scenario that I am predicting for this decade. Political gridlock and the attendant noise level don’t help either.
You’ve got to work with the market you have, not the one you want, and these short volatility trades could be your bread and butter for the next several months.
For more iconoclastic and out of consensus analysis, you can always visit me at www.madhedgefundtrader.com , where the conventional wisdom is mercilessly flailed and tortured daily, or listen to me on Hedge Fund Radio at http://www.madhedgefundtrader.biz/ .
How do thoughtful, enjoyable posts end in antisemitism. And really, REALLY damaged psychoses?
Seriously... nazis... go get some help. Look within at your own failings and fix them. Once you're perfect then you won't need to blame an ethnic group for all your troubles.
They are actually 'those who claim to be sons of Judah' although of no blood relation. There were credited for being more true to their own father than the sons of Judah were to YHWH in the book of Jeremiah and were subsequently promised to 'never lack for a leader'.
I'm on the other side of that vix trade here. It is tough with Fucknanke and his Jew buddies throwing M1 right into the market tick for tock .. M1 overlays SPY. If these fucks truly control the market ponzi scheme my trade goes badly. If there are still some market forces out there then the steady drumbeat of worse than expected will eventually win.
Double dip here we are...
Nikki..
yes!!! blame "jew buddies"... and while at it, why you don't wear some swastika, shave your head and build few camps for "Fucknanke and his jew buddies"
they may have jewish sounding names, but they are not real historic biblical jews. they are the ancestors, of the edomites, enemy of the jew, and usurping the jew's identity, and scapegoating them, is part of the ancient revenge. king herod was an edomite. lets give credit, where credit is due. there's a saying, that people talk the most, about what they know the least.
may be, but in any case i don't think ZH is place for KKK type of remarks to anyone real historical or not...
And what do you make of their Tribe owning our government?
Just some random coincidence that geithner,orszag,bernanke,
summers,paulson,greenspan,rubin,friedman,fuld,frank,
thain,dodd,mozillo,o'neal,gensler,soros, and a thousand
others from Morgenthau and Frankfurter in WWII and right on thru today with dual-Israeli/U.S. citizenship politicians kissing Israel's and AIPAC's ass every minute of every day?
Holocaust deniers are frequently and justifiably denounced, but those who deny that the Jewis power in this country, indeed the world, with particular attention to Goldman Sucks employees scattered around the globe at every key financial nexus, and overwhelmingly involved in every financial scam from war to peacetime, make Holocaust deniers look like true believers.
VIX is an outright short here.
Wow......that's one hell of a call.
but will you pay 20? with daily realized <16? Under 16 is buy, but here... its wash
" Zero interest rates assure that we aren’t going to crash any time soon,"
Two possibilities: 1. You're a troll. 2. You believe your own shit.
Personally, I hope it's 2.
do not get angry guys. He is just one "mad" hedge fund trader
I want to meet the assclown that is shorting vol at 19.5% here. What is your risk / reward there..... VIX goes to 15 max downside???... so 4 points..... Max risk in case we blow up again... 100??? Good trade idea there buddy. You must do really well with that risk matrix.
Hmmm....PIIGS blowing up and a possible Israel strike on Iran and Israel-Hizbollah war this spring is a low volatility event? Interesting theory that is.
must be a real hoot watching shit in the rear view mirror, picking the winners and reconstructing trades.
Today DOW / SP500 are totally ignoring the bullish USD and bearish EURO.
Yikes.
http://www.zerohedge.com/forum/market-outlook-0
GS
Didn't gold start a correction in early Dec., exactly when the dollar rally started?
Euro has been sideways the last 7 trading days? SPY topped out in January?
If the rich lying son's of bitches would grab a paddle instead of making the taxpayer bail out all their earnings I would expect movement forward.
Unfortunately, all the captains of growth and finance are too busy sucking each other off to notice that movement stopped long ago.
"Don't knock it until you try it," says the rich man.
"Look, there is some growth!"
It's all over folks. Talk about slow boats to nowhere, (see link). Soon, you, yes you, can become the Captain of your very own Freighter, all you have to do is go down to the dock and pick one out, and it's yours!! Although, you may have to pay the abandoned crew, yes, that's right, Captains are abandoning their ships and crew and running for the hills.
http://www.youtube.com/watch?v=K1f3fODb2CU&feature=sub
Jesus Rusty - thanks for that link. Incredible story - wish there were stats that could be trusted on the shipping industry. Something tells me that the same spreadsheet folks doing that are the same ones doing the monthly U.S. unemployment data.
I want one. To escape the madness of "civiliazation", I will declare myself a sovereign nation, and float away.
I am sure the parasite class will just declare me a pirate, and come sink me. At least it will be mine....temporarily.
.
I'm all for setting up one's affairs like a perpetual traveler along the three flags theory, but these abandoned vessels should be seized and auctioned with no reserve, with the captive, unpaid crews splitting any proceeds beyond cost of transportation back to their home country. This is tantamount to being shanghaied.
short vol will, most likely, be the worst aggregate trade idea of 2010 (beyond brain-dead risk / reward there).
gun to head: vol up or down 10% ? one can argue either way except when asked 'how about 20%?'
end of story. yet another genius trading idea. thanks.
how many hours of kudlow must one watch before being able to come up w/ such soundproof logic ?
please, please, sell vol. what could possibly go wrong there.
I agree. He may be right that capital markets go no where in the coming months, but being short volatility given all the uncertainty just below the surface is idiotic. Being short volatility is almost always a dumbass position, as the unexpected can always occur.
i actually agree with article (even he did not mean it), sell VIX against buying straddles... you intraday will be higher then variance...
And on another note - why vol has to go up if something wrong. VOL is an asset class. Even if everything right vol can go up... I.e. inverse relationship VIX vs SPX is rather perverse... and its probably bcs most equity guys are long only
The bigger challenge to the slow boat idea and short vol right now is the possible scope of policy tightening, especially as it will be coordinated worldwide.
The Fed is taking steps to normalize monetary policy in the face of negative US credit growth.
i agree, global tightening cycle started. RBA, PBOC, BOK... Malaysia will be next... But issue is: even my 3yr old daughter knows, that first year of global tightening cycle risky assets perform badly... So, smart guys are short, dumb guys are flat. Who is going to sell it? The way how market trades - everyone ether short or flat.. No marginal sellers... So, you need true data puke, before we can find new sellers... Say -300K NFP. But most probable scenario he might be right and we have slow and painful grind low, with spikes of hopes...
Tighteneing makes the conditions right for a short position.
The slow boat always happens until the catalyst comes. Shockingly bad news always comes at a random time, but all your preparation is rewarded.
Painting by numbers is fun until you run out of numbers and find your pants down around your ankles . . . with wallet still in pocket. I will be laughing and reminding, lest ye ferget.
Can we send this guy on a slow boat to nowhere?
dude... get a grip. there are NO out of the money straddles... learn about call/put parity and then write sh*t up... what you was trying to say - sell strangles...
I guess you wanted to say ... what you were trying to say ...
thank you. english is not my native tong... thanks
white man speak with forked TONG
nah, i am not white... you use to call us nips, nuke us and put us in camps.. just for record sake
Also things are slow because of confusion....
There seems to be some reason that there is still hope that within the currency whorehouse....there is still a fresh young maiden....not going to happen.....but unlike the rat....refuses to believe there is no cheese....
And we are economically adrift....because few countries "really have the real money" to honor their obligations....
And there has been no accountability.....It is as if the robber among us serves no penalty...and everyone has to sit besude the robber as if nothing is going to happen in the way of justice....thus making everyone nauseous...
And here come the populist clown like politics whose economic reasoning is non-existent....still shoveling out ice cream...with no intention towards good economic logic....
And knowing that Japan is a reasonable example of zombism....fails to take the high road....
The zombies stand frozen in front of the headlights....waiting to be run over....