Thursday, September 28, 2017

Letting It Ride On A Black Swan Event

Normally, gamblers seek to AVOID Black Swan events, today's gamblers are betting it ALL on a (continuing) Black Swan event...

As of now, this past year has been the least volatile since 1959...

"September is set to be the 11th straight month in which the S&P 500 has either risen, or has fallen by less than 0.1 percent"

Unfortunately, as we see below, despite being the least volatile year for the S&P 500 in decades, this has been the MOST volatile period for the VIX: There have been more large one day VIX spikes this year than in any year since 2008 (bottom pane). I am guessing that has a direct correlation with the RECORD short futures bet on volatility. Because as we see in the top pane, second derivative volatility is now tracking the futures short interest 1:1:

In other words, regression to the mean involving a commonplace two percent downside move in the S&P 500 will blow this entire shit show sky high. And it stands to reason that record misallocation of capital, Fed balance sheet rolloff, the real Forrest Trump, L'il Kim, all of the above, could cause that to happen.

But as long as they're having fun, why spoil the party?

They will party to the last day...

And their trusted sociopaths won't say one thing to them about risk.

You know, like last time: