A very interesting change seems to be taking place. Over the past few days, important segments who we believe are the elite of the bubbledom have slowly embarked on their journey to hedge their reputations. We could speculate on the reasons.
One, apparently is that they have immensely profited from the 6 month rally, they must have sold all their stocks that they were stuck with or they had averaged at the low. Then there is another factor. End of the year is traditionally a time for bonuses. So they better cash out quickly or they will not get real cash. This real cash is better than securities, which are even more worthless than US Dollars. At least the US dollars can be quickly sold or converted to cash. Imagine somebody paying you with structured products which cannot be sold. I know the problem as I have some such securities (though they are equities). Another reason for this change of heart could be that they are simply trying to hedge their reputations and positioning themselves for a "I told you so" period sometime in the future.
Coming back to the point, over the last two days we have seen Greenspan claiming that the US economy's growth will weaken in 2010 on Bloomberg (See the Video) and then Goldman has started to hedge their views. It has started with easiest indicator to track - US Employment.
It now says that its estimate about US losing 200,000 jobs in September is worng and instead the US Economy may have lost 250,000 in September (Bloomberg). I am quite sure this is the start of their slow shift into a bearish stance. It could also be a prelude for smart money to postion themselves for a large fall (this large fall may not be a few days affair it could be a gradual slide down over a period of time as investors/people become increasingly skeptical about the mythical green shoots. We may have to reserve our judgement about the intentions of those behind green shoots logic out of academic etiquette.
Let us simply turn our back on the debate on whether there are green shoots (at least on our blog) . Suffice to say that it is likely to say that there will be no meaningful recovery (if at all we can call it a recovery in the first place) till at least till the end of 2010. It is likely to go beyond that. As for reaching the output of the peak era, I would think it could be beyond 2012. We have the finance chiefs of EU saying that they are unlikely to remove the stimulus measures till 2011. What more evidence do we need?
What should we do? We believe that it would be best to buy insurance. The fact that October has traditionally been one of the most volatile months is a sufficient reason to buy this insurance.
See the chart of VXX and VIX below. Technically both of them are screaming text book buy cases (Disclosure: I have been telling my friends, and some of them have bought VXX).
CLICK ON THE CHARTS TO ENCLARGE THE IMAGE FOR A BETTER VIEW
The Chart of VXX is especially interesting as it has seen a steady increase in volumes as the Dow peaked near 9500 over the past two weeks.
Readers need not get too disappointed. All these actually means that our view that commodities will be the business to be in is being validated with each passing day. So prepare yourselves for the coming winter (need not necessarily be a storm), the aftermath and the sunshine. Only that we should all be cautious. Rest assured, we will always be there to give you our objective views since we are traders.
One, apparently is that they have immensely profited from the 6 month rally, they must have sold all their stocks that they were stuck with or they had averaged at the low. Then there is another factor. End of the year is traditionally a time for bonuses. So they better cash out quickly or they will not get real cash. This real cash is better than securities, which are even more worthless than US Dollars. At least the US dollars can be quickly sold or converted to cash. Imagine somebody paying you with structured products which cannot be sold. I know the problem as I have some such securities (though they are equities). Another reason for this change of heart could be that they are simply trying to hedge their reputations and positioning themselves for a "I told you so" period sometime in the future.
Coming back to the point, over the last two days we have seen Greenspan claiming that the US economy's growth will weaken in 2010 on Bloomberg (See the Video) and then Goldman has started to hedge their views. It has started with easiest indicator to track - US Employment.
It now says that its estimate about US losing 200,000 jobs in September is worng and instead the US Economy may have lost 250,000 in September (Bloomberg). I am quite sure this is the start of their slow shift into a bearish stance. It could also be a prelude for smart money to postion themselves for a large fall (this large fall may not be a few days affair it could be a gradual slide down over a period of time as investors/people become increasingly skeptical about the mythical green shoots. We may have to reserve our judgement about the intentions of those behind green shoots logic out of academic etiquette.
Let us simply turn our back on the debate on whether there are green shoots (at least on our blog) . Suffice to say that it is likely to say that there will be no meaningful recovery (if at all we can call it a recovery in the first place) till at least till the end of 2010. It is likely to go beyond that. As for reaching the output of the peak era, I would think it could be beyond 2012. We have the finance chiefs of EU saying that they are unlikely to remove the stimulus measures till 2011. What more evidence do we need?
What should we do? We believe that it would be best to buy insurance. The fact that October has traditionally been one of the most volatile months is a sufficient reason to buy this insurance.
See the chart of VXX and VIX below. Technically both of them are screaming text book buy cases (Disclosure: I have been telling my friends, and some of them have bought VXX).
CLICK ON THE CHARTS TO ENCLARGE THE IMAGE FOR A BETTER VIEW
The Chart of VXX is especially interesting as it has seen a steady increase in volumes as the Dow peaked near 9500 over the past two weeks.
Readers need not get too disappointed. All these actually means that our view that commodities will be the business to be in is being validated with each passing day. So prepare yourselves for the coming winter (need not necessarily be a storm), the aftermath and the sunshine. Only that we should all be cautious. Rest assured, we will always be there to give you our objective views since we are traders.
No comments:
Post a Comment