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Randoms: Buy the Rumor and Sell the Fumes?


Turnaround Tuesday arrives on cue.

It's Turnaround Tuesday in the City of Critters and the world is awash in dripping crimson. We noodled this notion last Friday on the Buzz & Banter and true to form the tape is taking it on the chin.

Geez, it seems so obvious with the benefit of hindsight.

As I weigh the fray and what to say, I continue to banter with my brethren on where we are and what it means. Professor Metro hit me on IM and asked if his Buzz yesterday aptly captured the current context of the market. I responded that "Yep, but I wonder if it's as easy as buying the rumor and selling the fumes?"

Once upon a time, conditioned complacency was so rampant that the VIX hugged the ten-handle for years. I'm not talking about the dreaded 70's, mind you-this was a few years ago!

I pull this chart to prove a point; while the mainstream media points to the muddled volatility as a proof point of compressed pressure, the tape continued to grind higher until the wheels finally fell off the wagon. It didn't matter until it did; and when it did, it mattered a lot.

Click to enlarge

That's not to say history repeats; if we've learned anything during the financial crisis, it's that historical precedent need not apply. The same imbalances that caused the crisis are cumulative in nature and ever-present underneath our feet. The saving grace, at least for the time being, is that corporate credit continues to suggest the collective comeuppance is a ways away.

With that said and respected, I would humbly offer that the next ten percent is to the downside. I'm not betting the farm -- it's one thing to have a view and another to be held hostage by it -- but my smallish S&P position, with positive gamma, is skewed to that side.

As always, I hope this finds you jinglin'.

Random Thoughts:


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