September 12, 2016

A nasty day when things fall apart

I have long thought that the disruptive impact of quant strategies had turned our markets upside down, to the extent that their models and algos chased priced and volatility.

This meant, at least to this observer, that buyers have lived higher and sellers have lived lower.

Today we see the sour fruits of their strategies that are agnostic to private market value and ignorant of balance sheets and income statements.

It can be debated what tipped over the markets and changed their momentum -- hawkish Fed Speak, the disassociation of a weakening real economy with higher stock prices, Wells Fargo's boatload of bogus accounts, recalls at General Motors and Ford, the avoidance of taxes by Apple and other multinationals, or something else.

But it is happening nonetheless, and with a vengeance not seen in months.

Several days ago I decided to move more aggressively to the dark side based on my perception that the downside was dramatically greater than the upside. I abandoned the notion of being reactionary in favor of being anticipatory for that simple reason.

I also would note that Friday was a vivid example of why I am so against the idea of selling naked puts, as we discussed earlier in the summer.

There will be no "Takeaways" as I plan to leave early for a few cocktails, and it won't be a rendezvous with some cheap tequila on the cold linoleum floor.

Long SDS
Short AAPL, SPY, GM, F. 

via thestreet