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One question posed to me many times in my life – – and it’s a question I’ve silently asked of myself – – is: “Why are you a bear?” Yesterday, after years of struggling with how to answer this question honestly, I hit upon the truth, and it was a relief to finally undo this Gordian rubric. So here’s the answer: I’m not.
The roofline on my house is very steeply-pitched, and I have an unusually tall house. Therefore, it’s extremely hazardous to do any work up there.
Just about the only time someone successfully did so was, years ago, when I hired some professional Christmas light installers to festoon my entire roofline with white lights. It makes for a very cool effect, but because it cost me so much, I decided to leave them up there forever. (At the risk of coming off as gauche, I want to be clear that you wouldn’t even notice the lights unless they were on).
That was years ago, though, and the bulbs were incandescent, and as such, they started to burn out, one by one. It would cost me about $400 (at least) to hire someone to come out and replace even one of those bulbs, since it was so high up, so – – thrifty soul that I am – – I invested $300 in a very tall ladder, figuring that it would last forever and I could use it for other things in the future.
(more…)The ‘but’ is the old saying “markets can remain [seemingly] irrational longer than you can remain solvent” if you fight a trend that is intact at any given point. Since March, 2020 that trend has been up.
Structurally Over-bullish
Below is a chart showing the 10 week exponential moving average of the Equity Put/Call ratio (CPCE) that we review periodically in NFTRH for a view of the structural over-bullish situation in stocks. I write structural because it has extended much longer than extremes in the CPCE have done at previous ‘bull killer’ danger points, after which risk was realized in the form of moderate to severe corrections.
The trend began logically enough at a ‘bear killer’ reading in the midst of max pandemic fear. We noted at the time that market participants were not just bearish, not just risk averse, but absolutely terrified. So the recipe is this: take 1 lump of terrified investors, add a heaping helping of the Fed’s money printing and voila, enjoy the taste of a slingshot rally that is very filling despite its inflationary odor.
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The foundation of all quantitative or statistically-based options traders rests on one statistical law – The Law of Large Numbers.
(more…)This morning, by way of a two hour plane ride, I traveled from the least-populated state in the U.S. (Wyoming) to the most populated (California). Waiting for me in my mailbox was yet another item from the Secretary of State in the $300 million boondoggle known as the……….
