As I came back from holiday I cast my support, if only temporarily, for the bearish side of the spectrum. I see few opportunities to add to existing investments, or to begin new ones, but plenty of upside in betting on the short side of global equities. So far the market has been undecided on whether my call will prevail. But I am confident that it will be slightly more difficult for the longs in the next few months. I also said, though, that I didn't see any indication that this would be the big kahuna sell-off forcing the S&P 500 to re-tag 666. A cop-out in the eyes of many I am sure. But I really don't think it is wise to spend your time trying to plot a path for the end of the financial world as we know it. Ask bears of the 2011 vintage how they're doing, if you are not sure what I am talking about.
Read MoreNormally put options serve as protection for large, mainly long only, asset managers. Picture an investor committee meeting at a large pension fund in the wake of a equity market drawdown. The core portfolio is down, but the astute and prudent portfolio manager dodged the bullet by buying put options on the market or the funds individual stock holdings. This is the way it would normally work, but there is nothing normal about the current market.
A WSJ piece by Ben Eisen and Aaron Kuriloff this week alerts us to the topsy-turvy world of financial markets in an environment where the "reach for yield" is the only game in town. In short, in a desperate search for regular income and "yield" some pension funds in the U.S. are turning to the nuclear option of selling put options. I will let Eisen and Kuriloff describe the madness;
Read MoreIt's always nice to come back from holiday to realise that markets haven't done much in your absence. Economic data in my neck of the woods have been mostly uninteresting. Q2 GDP growth in German was a tad higher than expected, and French unemployment declined to a four-year low in the second quarter. This is encouraging for certain, but these data merely confirm that the cyclical recovery in the Eurozone is alive and well, consistent with virtually unchanged survey data in recent months. In markets, global equity indices have either continued to slowly melt higher or traded sideways in the past two weeks, and U.S. 10-year yields have been locked in a tight range around 1.5%-to-1.6%. In fairness to other markets, I should note that the spot dollar index has declined 2.5%, and that the the oil price has staged a convincing rally. But overall, we have seen no major break-outs in the key asset classes.
Read MoreLet's be clear about a number of key points from the start. Movie characters—especially in action movies like Star Wars—are infinitely less complex than the characters we can create and groom in short stories and novels. This is not because script writers and directors are superficial and simple-minded, but because different rules apply when you're writing a blockbuster movie script [1]. This is even more so when you consider that the writers of this particular script were writing for none other than the Star Wars franchise. No pressure whatsoever!
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