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Thinking

How To Ride A Bucking Bull: Stay Calm And Hang On…For Now

This bull market in U.S. stocks is now the longest, and by many measures the most hated in history. After almost quintupling since the global financial crisis of 2008, I look back and see an incredible rally that has never been totally convincing. Behind the bull market lurk apparent culprits […]

Making the Most of Spread Product Tails

Price action since the February volatility shock suggests that investors continue to grow more confident in the durability of US risk assets. Central bank quantitative easing (QE), robust corporate earnings, share buybacks, and tax incentive-driven repatriation have muted the negative impact of unexpected election outcomes, strains on geopolitical and economic […]

Time To Bail Out Of Bonds Into The Relative Safety Of Stocks?

Trouble is afoot, again, for the bond markets. Could bonds today be more unsafe than stocks? For the long maturities in the global bond market, it appears so, at least in the near term. Despite the jawboning known as “forward guidance”, central bank support for bonds is naturally beginning to […]

More Volatility Means More Selling

Remember when just a few months ago, every dip in the stock market was met with a strong bid. Now, it seems, every rally is met with strong selling. There are several reasons for this shift, which is entirely rational. Most important is a sharp rise in volatility, which has […]

Buying Stocks Now Is Betting On Buybacks

It is no secret that a large portion of the rally in equities over the last few years, and especially the rebound from the lows of early February, has been bolstered by the record amounts of capital sitting in the coffers of American corporations which, has naturally found its way […]

The Great Momentum Crash

All good things might not come to an end, but they certainly attract attention and ultimately create the potential for excess, as witnessed in the stock-market crash of the past few weeks. Nowhere in the investment world has this been more visible than in the quantitative investment strategy known as […]

Default, Devaluation Or Debt Deflation — Time To Exit Longer Maturity Treasuries?

I have to admit that the accelerating fall of the unloved U.S. dollar along with recent pronouncements from the administration have taken away any remaining support from even the most die hard of dollar bulls such as yours truly. On the one hand, very large positive carry is embedded in […]

The Hidden Fountain Of Youth Driving The Markets

As we reach the end of 2017, it is impossible not to reflect back on the fantastic rally in risk markets. Yet again, risk markets defied expert opinions and delivered to investors a massive gift of capital appreciation. If there has been one mantra that has worked this year, it […]

Sell Duration To Hedge Equities

Yes, you read that right. The risk asset market today is one very highly levered yield trade. Whether you look at FAANGs, Nasdaq, EM equities, High Yield, short volatility strategies or even long Treasury bonds, the juice that keeps asset price appreciation going is the low level of yields. Common […]

Here Comes the Melt Up! Spot Up, Vol Up

Option traders implicitly believe that when the stock market goes up, volatility falls, and when the stock marketfalls, volatility rises. This assumption, which is based on years of empirical data, is implicit in many of the volatility-based strategies that have become common place today. To mention a few: volatility targeting, […]