Thursday, May 4, 2017

"There Was No One Left To Fuck Over"

This will be biblical, I guarantee you that much...

Today the Roman Congress took the first steps to repeal the post-2008 financial regulations, and also to repeal Obamacare, which will eventually leave 24 million people without health insurance. 

It was a "good day" for corruption so Circus Clownius who has "amazing" health coverage by the way, is very happy:

Now, back to collapse in broad daylight...
Wall Street's persistent delusion is of a global Central Bank "put" - A bid below the market that will prevent major crash and hence allow gamblers to ignore systemic risk. It didn't work so well in Y2K, 2008, 2011, or for that matter 2015/2016, but it always exists "now". 

Why is options implied volatility so low and complacency so high?

ZH: The Guru Explains
"If one believes there’s a reduced probability of a market crash, volatility selling strategies look even more attractive...Global central banks have helped in both aspects by lowering yields and reducing tail risks...with a [current] near-record pace of  central bank balance sheet expansion (highest since 2011) and record-low levels of market volatility. This has further emboldened volatility sellers and other strategies that increase leverage based on market volatility"

"The key question is when and how will this end. Will volatility just grind higher as the central banks start normalizing, or will it explode and wipe out some volatility sellers and levered strategies"

Neither a modest macro slowdown nor Fed tightening is likely to tip over the market on its own. However, if it happens in the seasonally weak time period [aka. "now"], and if it trips up some of the volatility sensitive strategies the increase of volatility could be more substantial. For these reasons investors should closely monitor incoming macro data such as tomorrow’s payrolls.

How about a China-induced commodities meltdown, first quarter GDP implosion, recession stock rotation, blow-off top in Tech, a clueless Fed, and a Circus Clown in the White House, would that be an hypothetically worthy "catalyst"?

Correction. Not all volatilities are subdued