Every market bubble brings with it harbingers of the peak...it's all very complicated and technical but you too can find them if you just know where to look.
In 1999, it was your drunk neighbor who made millions day trading pets.com in his underwear on the back porch. In 2007, it was the 22-year-old Vegas stripper who managed to accumulate $2.4 million in mortgage debt just before foreclosing on 10 homes.
In 2017, the harbinger of the latest fed-induced equity bubble could very well be former Target manager Seth Golden of Ocala, Florida. Until 5 years ago Golden was a Logistics Manager at his local Target store, but since quitting he has apparently made millions day trading volatility indices from the comfort of his home office. Per the New York Times:
Each morning, at the market’s open, Seth M. Golden, a former logistics manager at a Target store, fires up the computer in his home office in northern Florida and does what he has done for years: Put on bets that Wall Street’s index of volatility, the VIX, will keep falling.
It has been a lucrative strategy as the so-called fear gauge has been, outside of the occasional spike, largely fearless — confounding experts by sloping persistently downward and in the process making Mr. Golden a multimillionaire.
“There has been a lot of white noise,” said Mr. Golden last Tuesday on a day that the VIX plummeted more than 10 percent, allowing him to lock in profits from short trades. “You had North Korea, Afghanistan, Trump people resigning. But I was never nervous — so today I just sat back, ate some popcorn and cashed in my profits.”
See, it's a simple 5-step process kids: (i) ignore all those constant threats of global nuclear war, (ii) open an e-trade account, (iii) grab some popcorn, (iv) rake in the cash, and (v) rinse and repeat.
So, what is a Golden's vol strategy that has allowed him to turn $500k into $12 million in just 5 years. Well, it's all very complicated but is apparently grounded in the very technical thesis that "volatility desensitizes over time."
But after every spike of fear must follow a longer period of calm, Mr. Golden contends, which, he argues, is a perfect scenario if your bias is to always bet against fear.
“The nature of volatility is that it desensitizes over time,” he said. “Which is why the index has been tracking down for so long.”
Mr. Golden, who is 40, lives in a suburb of Ocala, Fla. Since he has been shorting VIX, he says his net worth has gone to $12 million from $500,000 in about five years.
So, is there any downside to this seemingly 'perfect' trade? Of course not...as long as you can predict what the next "existential shock might be"...
“Yes, it is a crowded trade,” Mr. Golden acknowledged. “But I don’t worry about crowds — I just worry what the next existential shock might be.”
Basically, as long as you can accurately predict the exact date and time of the next 9/11 attack you're golden with Golden's strategy (see what we did there?).
Of course, if it doesn't work out, Golden has a great future as an E-Trade spokesman...