Of course, it's not MY point of view. It's a system signal.
That's why "WE".
I am one of those permabears who expects something worse than
1987. The reason is that the use of options has increased
greatly, and the volativity has remained extremely low, while
the bullishness stayed at record highs on deteriorating
fundamentals. Moreover, I have been monitoring the Fed's
activity, and I found that these sharp rallies have
very good correlation with the Fed printing. Therefore,
I believe there is no intrinsic market support, it's
all Fed-generated.
So, the situation now is similar to "portfolio insurance"
of 1987, multiplied by 1000. A lot of puts have been
shorted virtually naked, due to record low volativity.
If the market starts going down sharply, the volativity
will also sharply increase. The naked put shorts will find it
necessary (just from Black-Scholes model they are using)
1) to buy back puts they shorted naked, selling pressure
or
2) to dynamically hedge their multi-month naked put shorts,
which will result in enormous selling pressure in the
futures market.
Of course, crashes are very low probability events. So,
I just find that probability somewhat higher now.
As to bonds, they are way, way overpriced, a direct result
of foreign CB buying. I mean, everybody knows the inflation
"tricks" of the BLS makes them underestimate inflation by
at least 2-3%. So, real rates are negative. Do I want to
hold bonds? NO! The foreign buying has now virtually stopped,
and even reversed. IF the dollar starts going down for real,
and real selling of the bonds by foreigners begins, I expect
10% rates easily. That thanks to all the printing.
I just think we could be in a secular bear market. When the
next wave down starts, it is highly likely imho it will start
with a crash |
