"Go long Russell 2000 vs. short S&P 500 via futures or total return swap – Russell 2000 futures have traded persistently cheap to fair value due to the high borrow rate on small-cap stocks, while S&P 500 futures have traded rich over the last 2 years as equity financing rates were driven higher by regulatory and industry changes. A long/short trade via futures allows the investor to collect this financing spread, and thus would be expected to yield a positive carry in addition to any outperformance (this carry was ~90bps annualized over the last year based on average futures roll costs). A swap-based implementation of this trade would similarly provide a positive carry, while eliminating dividend and futures roll risk."
"... we would, under most circumstances, “see” this unanimous direction of all ten markets to the upside to be a harbinger of a bearish move… the harbinger of the end of the current bull market; but… and this is perhaps the very biggest of “buts”…this time may be different… maybe. This time the markets seem to want to levitate skyward and thus far any attempts to “call” the top and positions ourselves in anticipation of a downward price correction have proven futile and badly wrong."
"The S&P: This has the ominous look of what some of the Old Guard amongst the market technicians used to call “Three Peaks and a Domed House” pattern, which always gave way to substantive weakness. All we know is that Friday’s action was horrific and that the volume swells on the downside these days, and wanes on rallies!"
- Dennis Gartman
This morning's decision by the Swiss National Bank has polarized the investing community. From the 'smartest men in the room' to the 'most renowned newsletter writers in the world', the reactions could not be more different...
Say what you want about the gold price languishing below $1200 (or not, as the case may be, after this week), and say what you want about the technical picture or the “6,000-year bubble,” as Citi’s Willem Buiter recently termed it; but know this: gold is an insurance policy — not a trading vehicle — and the time to assess gold is when people have a sudden need for insurance. When that day comes - and believe me, it’s coming - the price will be the very last thing that matters. It will be purely and simply a matter of securing possession - bubble or not - and at any price. That price will NOT be $1200. A “run” on the gold “bank” would undoubtedly lead to one of those Warren Buffett moments when a bunch of people are left standing naked on the shore. It is also a phenomenon which will begin quietly before suddenly exploding into life. If you listen very carefully, you can hear something happening...
Every year, David Collum writes a detailed "Year in Review" synopsis full of keen perspective and plenty of wit. This year's is no exception. "I have not seen a year in which so many risks - some truly existential - piled up so quickly. Each risk has its own, often unknown, probability of morphing into a destructive force. It feels like we’re in the final throes of a geopolitical Game of Tetris as financial and political authorities race to place the pieces correctly. But the acceleration is palpable. The proximate trigger for pain and ultimately a collapse can be small, as anyone who’s ever stepped barefoot on a Lego knows..."
Trader's Magazine reports that "as part of KCG's continued push into the institutional trading side of the business"... which is a euphemism for please trade with us: we won't blow up again, we promise... "the well-regarded and historically focused market-maker [ZH: if you keep repeating that it magically comes true, just ask world-renowned trader Dennis Gartman] has built its first brand new algorithmic trading tool - Catch." What does the algo known as Catch do? Well, supposedly it offsets the impact of all other algos who have crushed market liquidity.
"Wrong" again. Just two days ago we mentioned how world-renowned wrongness appears to be a pre-requisite for selling investing newsletters as Dennis Gartman unleashed his Nikkei 25,000 prediction on the world. Crucially though, it appears the great Gartman has taken the first step on the path to rejuvenation by 'admitting' his wrongness (though appears to have fallen short of making amends) as he told CNBC this morning, "I went neutral on stocks and I actually turned quite bearish for a couple of days – clearly that was wrong." What is clear - just as was proved by no lesser investing dynamo than Whitney Tilson - investing prowess is inversely proportional to the frequency of appearance on financial media... trade accordingly.
"We play the “Great Game” as we have been taught and as we have learned, being reticent about following inordinate strength and/or inordinate weakness; holding as best we can to major trends and always remembering that in a bull market… and this does still remain a global bull market… there are but three positions one may have: Aggressively long of equities; “pleasantly” long of equities, and neutral of them." - Dennis Gartman
"... it does not appear that we shall see the S&P futures trade into “The Box,” and that makes us all the more suspicious of share prices generally, for a market than cannot even retrace 50-62% of its previous weakness is a market that is weaker, internally, than it might at first appear. Worse, failure here suggest that a fully-fledged bear market has begun, for this would be a clear failure well below the highs of the last interim rally, with the lows of the last interim break having already been taken out to the downside." - Dennis Gartman
"We reduced our derivatives position even further, selling just-barely-out-of-the-money calls against our newly established aluminium position. Hence one half hour into the market we were marginally net long… and then panic hit! We will likely take no further action in our own account today, for we are now, as noted above, marginally net short… and we do indeed mean marginally…" - Dennis Gartman
Because humor like this obviously costs money. As always, from the one and only Dennis Gartman: "Down 35 points one day; up 35 points the next! The Bulls were taken out and shot Tuesday; the Bears were shot yesterday and all we know for certain is that the upward sloping trend still holds and that weakness is to be bought with the Fed still behind the market."
"At the moment then, we are reticent about owning equities..."
Gold prices are up around 1.5% from last night's close. Here's why...
It's lights-out for the world-renowned Dennis Gartman...