I don't really post these for anyone else but for my own intuition to see how it turns out. But I'll have a go at explaining for anyone who finds it worth reading.
I've been waiting for this moment for a long time - and at times, been impatient. But it is now becoming clear where we are in this 'volatility cycle', in comparison to the volatility cycle of the 2008 financial crisis.
I'm sure many of us are aware of the risk of serious economic crisis literally around the corner. Not to say I/we know when, or how serious -but rather that I'm pretty cock sure there is elevated risk of serious economic crisis.
I won't go too deep into the macros because, well, you should know. And the conclusion I come to with what I think I know is that the fed may have created a multi asset bubble. How? Go google what % of dollars currently in circulation were printed in 2019-20.
To conclude, kicking the covid recession can down the road gave us the final over extended bull run of. Bringing the end to a 12 year bull market. This goes for economic cycle too - monetary policy has been largely loose for this entire period (correct me if I'm wrong, I haven't actually checked the data on this.). But I do know it has been loose for a long time and the fed has stood ready to rescue markets and the economy where required to keep things tidy - ie. markets and economies growing.
But as we all know, economies go in cycles, too. And after every boom comes a necessary evil - the recession. After every recession comes a boom again.
We need a recession - but the further the can is kicked down the road, the higher the risk that it goes deep.
Long story short and probably way to brief, the fed and government's over stimulation of the economy plus the supply issues born from pandemic and war have caused dollar devaluation and inflation. I don't care what anyone says - the SPX should not have gained 120% from the Covid lows. This is just silliness because of overstimulation (Michael Burry would agree).
Why? How? Go google what % of dollars currently in circulation were printed in 2019-20.
I'm surely not the only who sees things this way, right?
All of this, plus some amateur looking TA comparison to 2008, and staring at these charts for far too many hours, days, weeks, months, - I think capitulation is around the corner. Terrible news for most, I know. I don't wish for this to happen - I'm just following the fed. And would rather profit from the consequences of policy mistakes (kicking the can down the road) finally being rectified (Quantitative tightening, increasing interest rates = restrictive monetary policy = no more money printer until inflation and demand and prices calm tf down).
So, how do I plan to profit from this?
Well, volatility takes off to it's high's of $90 when we see capitulation. But, if history rhymes, we will see one last rally in the SPX - and the last sustained drop in volatility before a capitulation event. I am short VIX currently, but stand ready to build long VIX at tops of SPX rallies, eventually neutralising my position towards support, and phasing out shorts and tightening up stops on shorts. I expect this to happen over the next 1-2 months. Let me be clear - the short position is no biggy here - it's just because clearly we may see a relief rally soon, before capitulation. So I expect volatility to drop BEFORE taking off. So I'm short, phasing into long. Then I'll see you all when VIX is at $80-90 - then I will phase out of longs into MAXIMUM short positions on VIX. Let me be clear - I'd short VIX at $80-$90 with everything I have. And I plan to. Seriously. I encourage you to think about it and debate your reasons why that is a bad idea.
And with the proceeds from going long VIX through the volatility spike and then shorting VIX at $80-90, once volatility drops to c$35-25, I will start phasing into QQQ - 3 x leveraged Nasdaq 100.
Anyway, the anticipated capitulation event could be triggered by any external factor - war escalating, fed increasing rates more than expected, something completely unforeseen etc etc, it's not important - what's important is that the economy has been running hot, inflation is high, asset prices are in bubble territory, and as a result the whole system is vulnerable - we just need something to happen for it to be an excuse for the dominoes to fall as they should at the peak of an economic cycle, and should have happened two years ago. Then, once the dust settles in a couple years (possibly longer depending how bad) we can all grow sustainably (hopefully in more ways than one) again in the next boom cycle.
Thank you for reading.
This is not financial advice
I've been waiting for this moment for a long time - and at times, been impatient. But it is now becoming clear where we are in this 'volatility cycle', in comparison to the volatility cycle of the 2008 financial crisis.
I'm sure many of us are aware of the risk of serious economic crisis literally around the corner. Not to say I/we know when, or how serious -but rather that I'm pretty cock sure there is elevated risk of serious economic crisis.
I won't go too deep into the macros because, well, you should know. And the conclusion I come to with what I think I know is that the fed may have created a multi asset bubble. How? Go google what % of dollars currently in circulation were printed in 2019-20.
To conclude, kicking the covid recession can down the road gave us the final over extended bull run of. Bringing the end to a 12 year bull market. This goes for economic cycle too - monetary policy has been largely loose for this entire period (correct me if I'm wrong, I haven't actually checked the data on this.). But I do know it has been loose for a long time and the fed has stood ready to rescue markets and the economy where required to keep things tidy - ie. markets and economies growing.
But as we all know, economies go in cycles, too. And after every boom comes a necessary evil - the recession. After every recession comes a boom again.
We need a recession - but the further the can is kicked down the road, the higher the risk that it goes deep.
Long story short and probably way to brief, the fed and government's over stimulation of the economy plus the supply issues born from pandemic and war have caused dollar devaluation and inflation. I don't care what anyone says - the SPX should not have gained 120% from the Covid lows. This is just silliness because of overstimulation (Michael Burry would agree).
Why? How? Go google what % of dollars currently in circulation were printed in 2019-20.
I'm surely not the only who sees things this way, right?
All of this, plus some amateur looking TA comparison to 2008, and staring at these charts for far too many hours, days, weeks, months, - I think capitulation is around the corner. Terrible news for most, I know. I don't wish for this to happen - I'm just following the fed. And would rather profit from the consequences of policy mistakes (kicking the can down the road) finally being rectified (Quantitative tightening, increasing interest rates = restrictive monetary policy = no more money printer until inflation and demand and prices calm tf down).
So, how do I plan to profit from this?
Well, volatility takes off to it's high's of $90 when we see capitulation. But, if history rhymes, we will see one last rally in the SPX - and the last sustained drop in volatility before a capitulation event. I am short VIX currently, but stand ready to build long VIX at tops of SPX rallies, eventually neutralising my position towards support, and phasing out shorts and tightening up stops on shorts. I expect this to happen over the next 1-2 months. Let me be clear - the short position is no biggy here - it's just because clearly we may see a relief rally soon, before capitulation. So I expect volatility to drop BEFORE taking off. So I'm short, phasing into long. Then I'll see you all when VIX is at $80-90 - then I will phase out of longs into MAXIMUM short positions on VIX. Let me be clear - I'd short VIX at $80-$90 with everything I have. And I plan to. Seriously. I encourage you to think about it and debate your reasons why that is a bad idea.
And with the proceeds from going long VIX through the volatility spike and then shorting VIX at $80-90, once volatility drops to c$35-25, I will start phasing into QQQ - 3 x leveraged Nasdaq 100.
Anyway, the anticipated capitulation event could be triggered by any external factor - war escalating, fed increasing rates more than expected, something completely unforeseen etc etc, it's not important - what's important is that the economy has been running hot, inflation is high, asset prices are in bubble territory, and as a result the whole system is vulnerable - we just need something to happen for it to be an excuse for the dominoes to fall as they should at the peak of an economic cycle, and should have happened two years ago. Then, once the dust settles in a couple years (possibly longer depending how bad) we can all grow sustainably (hopefully in more ways than one) again in the next boom cycle.
Thank you for reading.
This is not financial advice
