It’s very tempting to cover my hedges and ride the way, just like it’s temping to sell my fucking longs. I am more or less frozen until I can figure out what to do, 20% weighted $SQQQ and the rest long. Even though I am hedged, I am still down 1.2% because things are blowing out way more than normal beta would indicate.
To recap: we have a problem with the Japanese markets, whereby their currency is rising rapidly and this is causing the very popular and successful yen carry trade to conclude. Bear in mind, the BOJ is likely booking extreme profits but those gains are quickly dissipating as American stocks get hit. Early this morning we are hearing a chorus of people beg the Fed to cut rates. Jeremy Siegel wants an emergency 75bps cut; but that would only serve to further strengthen the yen, wouldn’t it?
We also are faced with the specter of the Straits of Hormuz closing, which constitutes 20% of all global oil traffic, if a war with Iran materializes. What that might look like is stagflation, circa 1973 and 74, and it’s going to suck.
Multiple trading platforms are having difficulty remaining online due to traffic and this might cause another leg lower in stocks, once people are able to access their money.
During panics people act irrational. I am sure many of the stocks down today will rise again and the market isn’t going down forever. But this morning bounce feels a little too easy and nothing is easy, especially market crashes.
The VIX hit $60 this morning, which is the COVID era highs. Dare I say this situation we are in now is nothing even remotely as bad as when the global economy was shutting down, yet here were are at panic levels that are on par.
Be careful out there and try not to get tricked and fooled into risky trades.
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