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[dTraderB]

@KeithMcCullough

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TREASURIES: epic fall for both the US 10yr Yield and former Bond Kings, 2.39% last

2:34 AM - 27 Mar 2019

[dTraderB]

Liz Ann Sonders‏Verified account @LizAnnSonders

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Citi U.S. Economic Surprise Index back in negative territory since beginning of March

4:45 AM - 27 Mar 2019

[dTraderB]

Fearing Complacency 

Written by Michael Lebowitz | Mar, 27, 2019  

“So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself” – Franklin Roosevelt March 4, 1933

Those infamous words were spoken by President Franklin D. Roosevelt at a time when the nation was mired in the great depression, and the stock market had collapsed 80% from the highs of 1929.

We argue in this article that today, fear is exactly what we should fear as a wave of complacency rules the markets.

Investors fear volatility. Low levels of implied volatility are the result of investors that are complacent and not protecting against risks. Conversely, when volatility is higher, investors tend to be anxious, concerned about the future and as such take prudent actions to hedge and protect their assets.

Based solely on today’s levels of implied volatility, the media, central bankers and uninformed cocktail chatter would have us conclude that there is little to worry about. We see things quite differently and believe current indicators offer far more reason for fear than when implied volatility is high and fear is more acute.

No Fear to be Found

The graph below is constructed by normalizing VIX (equity volatility), MOVE (bond volatility) and CVIX (US dollar volatility) and then aggregating the results into an equal-weighted index. The y-axis denotes the percentage of time that the same or lower levels of aggregated volatility occurred since 2010. For instance, the current level is 1.91%, meaning that only 1.91% of readings registered at a lower level.

Data Courtesy Bloomberg

Beyond the very low level of volatility across the three major asset classes, there are two other takeaways worth pondering.

First, the violent nature in which volatility has surged and collapsed twice since 2018. The slope of the recent advances and declines are much steeper than those that occurred before 2018. The peak -to- trough -to- peak cycle over the last year was measured in months not years as was the case before 2018.

Second, when the index reached current low levels in the past, a surge in volatility occurred soon after that. This does not mean the index will bounce higher immediately, but it does mean we should expect a much higher level of volatility over the next few months.

Investment Takeaway

Given that volatility is cheap, wise investors should take advantage of this opportunity to buy options to hedge stock, bond and dollar positions. Traders might want to consider taking our advice a step further by getting long volatility with various options strategies or by buying call options on volatility. Volatility is just another asset class into which we might allocate when it becomes cheap and sell when it becomes rich. As Chris Cole at Artemis Capital says, “it is THE asset class since it is embedded in all others.”

Reasons for Fear

The following considerations fly in the face of the high level of complacency ruling the financial markets:

• The global economy is slowing
• Growth in European economies is slowing dramatically, including Germany where 10-year bond yields dropped below zero for the first time since 2016.
• China, representing 30% of global GDP growth, is weakening rapidly.
• Domestic GDP is expected to rise by only .50% in the first quarter according to the Atlanta Fed.
• The trade war with China, and to a lesser degree Europe, could flare up on a single tweet or statement and cause market and economic disruptions.
• Despite being ten years into an expansion and unemployment near 50-year lows, the Fed decided that Fed Funds above the historically low rate of 2.75 over the next two years is harmful to the economy. What does the Fed know that we do not?
• The potential for a hard BREXIT is growing by the day.
• Political drama is heating up with an election and possible Mueller findings.

These and other factors should raise concern.  

Summary

As highlighted by the volatility graph, the three major domestic financial markets are extremely complacent. If history proves reliable, a violent reversal is a clear and present danger. Our greatest fear today is easily the apparent lack of it.

This situation reminds us of a rip-tide on a sunny, beautiful day at `the ocean. The water looks relatively calm for all to enjoy without taking precautions. However, within a few steps lies a vicious underwater current capable of im.posing swift and unsuspecting demise. The difference between a great day at the beach and a disaster are closer than you think.

Now is a good time to heed the warning of the lifeguard.

https://realinvestme...cency-unlocked/

[dTraderB]

From WSJ morning report:

 

Market Facts

• About 6.45 billion shares changed hands on exchanges operated by the New York Stock Exchange and the Nasdaq Tuesday, the second-lowest number so far this year.
   
• Shares of Facebook have surged 28% in the first quarter through Tuesday, on pace for their best quarter since the third quarter of 2013, according to Dow Jones Market Data.
   
• On this day in 2000, technology stocks set a record for industry representation in the S&P 500 at 34.9%. Meanwhile, Cisco Systems became the world’s most valuable company, with a market value of $548 billion. Never before had any industry sector accounted for so much of the stock market and never had a company become the world’s largest in so short a time. Over the next year, however, tech shrunk to just 17% of the broad index, as tech stocks lost more than half their value. Cisco shed more than $425 billion—the fastest and biggest fall in market value any stock had ever suffered.

Key Events

The "ECB and Its Watchers" conference in Frankfurt features speakers from the European Central Bank throughout the day.

The U.S. trade deficit for January, released at 8:30 a.m. ET, is expected to narrow to $57.4 billion from $59.8 billion a month earlier.

Crude-oil inventories are scheduled for 10:30 a.m. Government data are expected to show U.S. stockpiles fell by 400,000 barrels last week, according to the average target of nine analysts and traders surveyed by the Journal.

The Kansas City Fed’s Esther George speaks on the economy and monetary policy at 7 p.m.

U.K. lawmakers will hold a series of votes to see if there is consensus on an alternative to Prime Minister Theresa May's Brexit plan.

 

 

[dTraderB]

 ",,,Three days later and that is exactly what happened. Selling dried up and prices bounced. While we are not in the clear yet, every hour that passes without tumbling lower decreases the probability we will tumble lower. While we only recovered a sliver of last week’s losses, the fact the selloff stopped in its tracks is a big win. Market crashes are breathtakingly quick and the longer we hold these levels, the less likely a continuation lower becomes.

I like the way the market is acting and the path of least resistance remains higher. That said, the rate of gains is slowing and that means we should expect more of back and forth. While I’d love to see the market surge higher every day, down days are a very normal and healthy part of every move higher. Resist the temptation to join the herd overreacting to every bump in the road."

https://cracked.mark...iver-the-goods/

[ryanoo]

It will be very interesting to find out how much the Tax payers get their tax return relative to the previous years.  They could rather owe money to the IRS.  Especially the middle class and below (the so-called bottom 90%).  This April 15th can be the opposite to the previous years.

[robo]

"Especially the middle class and below (the so-called bottom 90%)."

 

I'm not a tax expert, but I am an everyday Joe.   My standard deduction went from $12,700 to $24,000

 

I always have to take the standard deduction...  So for myself and others like me it was less....  All I can say is I expect rates to go back up,  and much higher in the years to come...  I did conversions from Traditional IRAs to Roth IRAs again this year and I will do the same next year too. The low rates will continue until Donnie is gone....   I think rates will be much higher in the years to come....  I use the Roth IRAs for trading so they are tax free, and with free trades at Vanguard it's a sweet deal for now.

 

 

 

2018 Tax Rates – Standard Deduction $24,000 2017 Tax Rates – Standard Deduction $12,700

https://www.kdpllp.c...e-tax-brackets/

Edited by robo, 27 March 2019 - 09:35 AM.

[ryanoo]

"My standard deduction went from $12,700 to $24,000" for Married filing jointly -- where the personal exemption of $4,050 per family member was eliminated -- for two of you, the net deduction went from 20,800 to 24,000; for family of three, from 24,850 to 24,000; four, from 28,900 to 24,000.  bad for families.  We usually received a few thousand dollars back, this year my wife wrote the check.  Like I said, it will be very interesting to see residents of how many states ended up owing money instead receiving the check.

https://www.fidelity...nged-deductions

Edited by ryanoo, 27 March 2019 - 11:07 AM.

[robo]

So VXF is under the 9 EMA, the 13 DMA, the 200 DMA, the 50 DMA, and we have traders guessing on when this move down will end. The trend is down, I'm on a sell signal.. NO GUESSING is required.  Who cares when the trend will change...If you are really a trader you can make money both ways with a very simple system. I'm VST trading SDS and VXXB today while I wait.  Waiting on the next buy signal to buy VXF back and I HAVE NO idea when that will be and why some traders continue to guess is beyond my thinking as a trader. Investors have a tougher job, but I'm not an investor, and I'm getting really sea sick from the wavers again... 

 

So here come Da-Bots again and they be BTFD...Excellent since I have traded VXXB twice already today.... Both winners so far....

 

I DON't care about any other index, because VXF is close to the total market using small and midcap stocks and the trades are free at Vanguard. 

 

Selling VXXB again and reducing my SDS position... Taking profits because a bounce is probably coming.... That's a guess, but I already took profits and I'm trading in the direction of the current trend with is currently DOWN....  When it changes so will I.

 

Back above the 50 DMA already....  The BTFD BOTS.... I like these dudes, because they are easy to trade with most of the time...

Edited by robo, 27 March 2019 - 11:23 AM.

[robo]

"My standard deduction went from $12,700 to $24,000" for Married filing jointly -- where the personal exemption of $4,050 per family member was eliminated -- for two of you, the net deduction went from 20,800 to 24,000; for family of three, from 24,850 to 24,000; four, from 28,900 to 24,000.  bad for families.  We usually received a few thousand dollars back, this year my wife wrote the check.  Like I said, it will be very interesting to see residents of how many states ended up owing money instead receiving the check.

https://www.fidelity...nged-deductions

LOL....  It will be interesting indeed.... The Mushroom man said everyone would love the new rates. I sure did!

Edited by robo, 27 March 2019 - 11:21 AM.