Mean Reversion

Bill Blain: "My Prediction Is That Around October 12 Markets Will Get Horribly Interesting"

"There are just too many contradictory currents out there. The unsustainability of burgeoning consumer debt, unfeasibly tight credit spreads, the sandcastle foundations of student loans, autos, housing and the CLO market, China, Trump, politics.. worries about what follows Brazil in the EM market, and whatever... The risks of a massive consumer sentiment dump."

Bill Blain: "Take The Red Pill, And Let’s See How Deep This Rabbit Hole Takes Us"

"The bottom line is yesterday’s slight bounce back in what remain Risk-Off markets feel about as solidly supported as an alligator in the Washington Mirror Pond.If there is a theme to what’s really going on, its “tedious inevitability.” So, with due respect, “bear” with me (geddit? see what I did there?). Take the Red Pill, and let’s see how deep this Rabbit Hole takes us. "

"Vol Be Crazy": Deutsche Wants To Know When The Insanity Will End

"one of the main themes this year has been the fall in vol. We argued three months ago that FX vol looked cheap given elevated policy uncertainty, but a pick-up was unlikely while the global growth pulse remained strong. Vol has since collapsed further."

"Someone Is Blowing Up": RBC Warns China-Induced Unwinds Are Escalating

"Something is off the past few weeks...  somebody’s ‘mean-reversion’ strategy (likely a stat arb / quant fund) has triggered ‘stop outs’ as the underlying commodities space now ‘catches down’ to the behavior already exhibited across the energy equities space throughout the course of 2017."

It's Different This Time...

Throughout history, financial bubbles have only been recognized in hindsight when their existence becomes “apparently obvious” to everyone. Of course, by that point is was far too late to be of any use to investors and the subsequent destruction of invested capital. This time will not be different. Only the catalyst, magnitude, and duration will be.

Shiller's CAPE – Is There A Better Measure?

Currently, valuation measures are clearly warning the future market returns are going to be substantially lower than they have been over the past eight years. Therefore, if you are expecting the markets to crank out 10% annualized returns over the next 10 years for you to meet your retirement goals, it is likely that you are going to be very disappointed.

Oil Tumbles Below $48 As JPM Warns Of Possible Commodity Liquidations

Any hopes for an early rebound in oil following last week's torrid plunge in WTI and Brent appear to be dashed, at least at the open, when WTI promptly tumbled below $48/barrel. While there have been no materal adverse catalysts over the weekend, three factors are being mentioned by Sunday night trading desks as drivers behind the latest seloff.

The 2nd Commandment Of Trading

"You can always buy it back" is one of the '10 Trading Commandments'. It is meant to encourage good risk management – cutting your losses before they kill you. But it is easier said then done and thanks to some useful academic work now we know why.

Citi's Matt King: "We Think You Should Sell"

"With spreads at post-crisis tights, equities making new highs, and new issues oversubscribed, markets are clearly exuberant. But could it be rational this time? We’re not convinced.... sell we think you should." - Matt King