First, a bit of shameless commerce – – for those of you potentially interested in joining Slope Plus, remember that this month I’m running a special (the first I’ve had in about half a year) in which you can use the service for free for a month. Just enter the coupon code trickortreat on the Subscription page, and voila, a virtual $29.95 is in your hands!
Now, on to my post………
Back on August 30, I did a post called Past Fear, Present Fear which, it seems, turned out to be really, really, really prescient. I urge you to give the post a glance, but in short, it drew a powerful parallel between the volatility leading up to the financial crisis and the volatility we were witnessing through this summer……….
I really didn’t give my analog enough credit, because so far, it is acting absolutely beautifully. Just to go way out on a limb, what I think is in store for the next year is something like this…….
(a) rather soon, certainly before the end of November, and probably within the next couple of weeks, we wrap up the current carnage with a swoon toward by frequently-cited target of between 22 and 23 on the VIX;
(b) the Powers That Be will be absolutely freaking out, and they’ll introduce one last “fix” (perhaps even as soon as the Fed announcement at the end of this month, but more likely later). They will introduce QE5, outlaw short-selling, or God knows what else. Whatever it is, it’ll be big, thus crushing the VIX again (and sending equities flying – – maybe even to new highs).;
(c) then the wheels will completely come off, and thank Jesus, Yellen will finally be utterly powerless to stop the tank that’s about to roll on top of her face.
The challenge for me is knowing what to do with these gazillion short positions I have, almost every one of which is profitable. My vow has been to cover everything when I reach my VIX goal, which I’ve shared repeatedly in the chart below. The moment of truth for me, though, is whether I’ll be willing to pull the trigger. The nightmare scenario, of course, is that I cover everything, and we get an honest-to-God crash. That’s pie in the sky, however, and if I have any sense at all (which is questionable), I will at least get “very light” if the VIX soars like I’m hoping.
One thing is for sure; the ga-ga- bullishness that was spewing all over the place in September has dissipated. These permabulls shouldn’t worry, though; the public has the memory of a tsetse fly.