There are no bears left - the ones that are left are trading
spike rallies, as I do, just read the clown thread.
Russ is the only bear left. He has his fundamental reasons.
Grrrrr.... -g- I enjoy reading his blog, as it is aligned
nicely with what I think. I agree with Russ.
Did you buy the dip? I did. -g-
I see the number of coupon passes, and I get long calls on the
dip. It proved very profitable over the last 2-3 years to do
it. I don't want to commit to the long side, cause Russ is
right, and this market could crash some day. The record
low spreads and record low volativity for a record long time,
and the possible manipulation (bid under the market)
makes this market very prone to a large scale decline in
a short number of days, also known as a crash. The risk
in this market is severely mispriced, since the Fed
always comes to the rescue. If there is a manipulator,
the market will overpower manipulation some day. This
always results in a large scale crash. Take silver in the
80-s.
The catalyst? The number of hedge funds shorting risk
has swooned, as shorting volativity (put options) has
ballooned their returns. A move in the market more than
2-3 standard deviations down could trigger a meltdown for
these players, who now hold a record number of short puts
on the market virtually naked, because the Black-Scholes
model tells them to do so at this volativity. We have
seen this in June this year, but the market was promptly
saved by the Fed. Derivatives can't control derivative markets,
some day the drop that can't be saved will originate there |
