This may sound a bit strange coming from a born German (and now proud U.S. citizen) but I’m actually quite a fan of Sir Winston Churchill as I was always fascinated by his irreverent personality. He had a very interesting upbringing as a child due to a rather complicated relationship with his then renowned father. What’s most compelling however, and what stands in stark contrast to the so called political leaders of today, is how he actively sought out seemingly unsurmountable challenges and then faced them head-on and without compromise throughout his entire life. He is remembered by many timeless quotes but here is one of my favorites:
Effectively yesterday’s wipe out in equities will be remembered as the day the IV short trade died. As you all recall I have been rather prolific on the subject of implied volatility over the years and I’m not averse to admitting that it has become a bit of a professional obsession of mine. Thus it was just natural that I would be raising red flags when seeing (repeated) signs of a possible market dislocation on the horizon. Which I then did right here, cautiously and as productively as possible, given the fact that many a bears species have come extinct over the course of the past decade.
Everyone apparently hates the Dollar now and continues to cheer its slow but steady demise. In a little over a year we went from nearly par with the EUR/USD to an exchange rate of 1.25 and the pace appears to be increasing. I’m literally heading to the ATM every single day now stashing as much Euros as possible as they most likely will cost me a little more tomorrow. It’s almost starting to feel a bit like living in Argentina, except that nobody else seems to care. Not surprisingly almost everything else, equities and commodities in particular, have responded strongly. After equities, are we now heading for a bull market in commodities? Let’s review where we are on [...]
Earlier this morning Secretary of the Treasury Steven Mnuchin doubled down on well timed inflationary comments he made yesterday at Davos thus pushing the Dollar over our technical LT edge and tumbling even lower hence. This pretty much puts the death knell tp any remaining hopes for a Dollar bounce in the near future and puts the DXY on a trajectory toward 87.5 and most likely lower.