chaos is a ladder-whats causing volatility in global markets
many of you have noticed what appears to be equity volatility in the us and hear the talking heads talk about inversion blah has the fed lost control blah. we're all gonna die, you know the usual. as we've noted in past entries we're feeling the effects of changes in the ECB's stance on going forward due to deflationary data from the eurozone. they've gone from being slightly hawkish to completely dovish ("whatever it takes"). this is due to deflationary data thats been coming out of the euro zone, but the dovishness is a method to reverse that psychological mindset. In a deflationary mindset consumers are more apt to holding onto currency/equivs due to expansion in purchasing power rather assets which loose. this drop in rates is a japanese style response to deflation. meaning with a negative yeild on their rates the incentive to hold cash and equivs is an instant looser, consumers are forced to search for yeild in risk assets. since this shift has been swift and drastic its caused an earth quake that's caused tsunami.
we're on the opposite end feeling the residual effects in the form of $tyvix or the volatility of the 10 year note. it appears that entities are going to the flight to quality trade not out of any real sort of logic but more programatically out of design. from a retail standpoint you should be cheering on these moronic instant loosers. why? because when they figure out theyre loosing money due to cost of carry. they'll switch from a flight to quality to seeking out yeild in risk assets helping risk asset valuations inflate further.why is that? because risk assets contain a positive drift compared to risk free assets because risk assets are based on the risk free rate. so lower yeilds, i say how low can you go? especially knowing central bankers are standing around like panhandlers begging for inflation in any form. is this equity volatility? just a slight spill over, but when things are digested. man. this is where money is made. patience is key
we're on the opposite end feeling the residual effects in the form of $tyvix or the volatility of the 10 year note. it appears that entities are going to the flight to quality trade not out of any real sort of logic but more programatically out of design. from a retail standpoint you should be cheering on these moronic instant loosers. why? because when they figure out theyre loosing money due to cost of carry. they'll switch from a flight to quality to seeking out yeild in risk assets helping risk asset valuations inflate further.why is that? because risk assets contain a positive drift compared to risk free assets because risk assets are based on the risk free rate. so lower yeilds, i say how low can you go? especially knowing central bankers are standing around like panhandlers begging for inflation in any form. is this equity volatility? just a slight spill over, but when things are digested. man. this is where money is made. patience is key