If it sounds like Klingon, just ignore it. If you think me some financial wizard, bear in mind I'm essentially a 1950s housewife. I literally have a cheesecake in the oven. I'll even double down by admitting I have never successfully called a top. I am much better at the math for finding a bottom.
The Dow, Nas, and S&P are all up amazingly this year. And from what we read confidence is at an all-time high.
All traders follow the VXX. The VXX is the ticker symbol to buy in to profit from volatility. In a nutshell it tracks the CBOE VIX futures. If that means nothing to you, you're not alone. In English that means the more volatile the market, the higher the VIX, the higher the VXX. Basically if you're in turbulent times buying the VXX is a defensive strategy.
In the past 5 years the VXX has gone from ~$800 to ~$34.
What does this mean? It means that the market is doing what a lot of experts tell you it does. Buy a broad fund and hold and watch it slowly chug up. Slow, sustained, boring growth. Essentially the market is doing what every 401 investor loves. Traders like me hate it. We prefer high volatility where short term buying and shorting yield quick explosive returns. We don't care if the market is up or down as long as it moves quick.
But there's another interpretation. We're watching the value set a record high while the risk is priced at a record low!!!! Said differently, that like the market is telling us that not only do we have record highs but we deserved them. That 23,000 is just a stepping stone as this trend will continue.
Wait? Low volatility? Toys R Us just filed bankruptcy. Sears is going down. P&G is in a proxy fight (I will invest if they LOSE, Peltz is correct). The food companies are almost universally down. Sure the FANG look pretty good (Facebook, Amazon, Netflix, Google) but this market is so overhyped that Blue Apron and Snapchat got listed. No way they should be public and only a dolt would invest. Pets.com all over again.
OK, I'm coming off like Zerohedge or Peter Schiff. But it sure feels like casino day in the market right now. Buy the Dow, buy tech, buy Bitcoin. It's all going to the moon and can't be stopped.
I'm not financial advice. Just throwing some pasta against the wall.
I believe the main reason volatility is so low, despite surging prices, is actually two reasons.
First, central bank interference (SNB in particular)... they're pumping billions of dollars into tech and blue chip stocks and are pretty much pot committed to needing the strategy to succeed in order to hedge against NIRP/ZIRP policies that are returning no or negative yield.
Second, it's no secret that most high volume/big money human brokers are long gone. They've been replaced by "buy the dip" algo's that are just following what the other algo's are doing and piggybacking like parasites off the backs of the reckless central banks.
As long as central banks keep interfering, there's no real incentive for the algo's to dump because they know the banks are pot committed and additional money is going to keep being pumped in.
It's funny, people in my circle look into what I'm saying and start to freak out when they realize what is going on. First, it's generally, "central banks can't invest in the stock market" and then they look into it and see what's happening and the response immediately turns too, "wow, it's totally rigged!!!Does this mean I just withdraw everything!?!?!"
No... definitely not.
The bottom might fall out tomorrow, or it might be a decade from now after all the rest of the central banks have taken turns dipping their toes in the DOW casino and there's no more left to pump.
My advice to anyone (and I'm
not a licensed broker (but I did stay at a Holiday Express last night), so take it with a handful of salt)...
Ride the wave, but make sure you're smart about it. Set up stop-on-quotes so that if the algo's all decide to turn in the other direction at the crack of dawn one morning, you're not waking up to utter catastrophe. As long as you do that, and you keep a diversified portfolio that isn't 100% tied to the market, you should be way better off than most when the rug is pulled out. (and that's not a question of if, it's a matter of when)
Like I said earlier though... this could be the end and tomorrow could be the day it crashes, or, it could be the middle and we could have years of this as other central banks all start jumping headfirst into the pool. Don't get out now... but do have your parachute set to deploy when the party officially ends.
