Tuesday, June 7, 2016

Idiocratic Self-Implosion: All Aboard Dumb Beta

"At the end the Idiocracy re-branded unhedged risk as 'Smart Beta', and went ALL IN"

CasinoNomics is the momentum ignition strategy used by Central Planners to ensure everyone is taking as much risk as possible. It works like this:

So far, so bad:

Wall Street has been a skeptic and steady seller of this short-covering rally since its inception in February. However, we just learned via Zerohedge, that they have finally started buying into this charade. They bought the worst part of the January decline. They sold the entire rally. And now they're buying again. Why? Because the worst performing U.S. index had been the Russell 2000 small cap index, which was down almost -30% at the lows. So of course, Team Groupthink overshorted it and subsequently it has massively outperformed. 

We've seen this movie before:

The Russell / Dow ratio:

"There's no point in hedging"
Index put/call ratio:

Option skew

% Bears

Skynet fucked up my count but I'm keeping it anyways. 70% of trading is by computers and clearly Skynet has never heard of Elliott Wave Theory. 

Nevertheless, 100% of panic is done by humans...

All aboard dumb beta: