I think its time we get back to talking about some of my strengths: identify weakness and being a cynical motherfucker about just about everything. Today I want to talk about how that applies to our global markets.
Today your word of the day is: Complacent.
That’s what are markets are, that’s what are citizens are, that’s currently the world. That’s dangerous.
Because too much of anything is a bad thing. Too much of one opinion is too damn much and typically triggers a reversal. Fair warning I fully expect this post to get more and more vulgar as I right because even as I am doing it the market place/globe is getting more and more irrational and my blood is once again nearing its boiling point. I digress.
So what’s my measure of complacency?
Implied volatility. Here’s Investopedia’s definition
I am effectively using it as a measure of fear. When IV is low, there is no fear. Everyone is honkey dory bullish, everything is positive, puppies are cute, Obama is a hero, big banks are cool, etc.
Well lets look at the financial sector of the market for a moment. If you have not seen an option page before do not fret, I’ll point everything out for you. Think of a bell curve, typically most things fall in the middle statistically, that is also the happy medium. 100% percentile is extremely volatile/risky, 0% is no fear at all, Winnie the god damn Pooh.
So let’s look at the implied volatility percentiles on some of the harbingers, etf’s and the market itself.
Let’s start with the 30000 foot view. As Drake would say. “Started from the bottom now we Ear.” Yes open your ears and listen to what the market is telling you! Look at this bubble blowing that we have going on. We are at all time highs in mediocre economic conditions. No I wont reference that. We are. Look around. You are a fool if you think unemployment has been fixed or think that inflation is not taking an effect. You have you head in your own ass if you think that the middle class of the USA is “healthy” Anyway. All time highs with all time high intervention. Coincidently I left 2008 in there so we could be reminded what it looks like when stocks sell off. Complacency is dangerous. This is not the first time this has happened.
How about Bank of America, coined to big to fail and a Harbinger of the US financial market place. 3%. You have got to be shitting me. Nothing could possibly be wrong with this bank. Nope none at all. Big bad Bernake and Co. have bought up all of the fear surrounding it.
Well how does this compare with the financial sector itself? 15%… find me a trade in that shit please. Scary. If it stays like this any longer, I may just start to accept it.
Not convinced how about another big bank run by another group of cracker jack fuckers. JP Morgan. 9%.
Im still convinced there is another bank of there that is the maxed out golden child. Let em see if I can find it.
Oh here it is! None other than the Vampire Squid itself. In, get this, the ZERO percentile!!!!!111111one one one. WTF .
Look at this shit!
So what happens when these bubbles burst? What does decoupling look like?
If the first chart wasn’t enough here is Netflix last year….
How about the poster child Apple? Is the decoupling over yet? I thought this was the most valuable company ever?