Ten years of unprecedented monetary intervention by the world’s central banks has produced an ‘Everything Bubble’ in which assets of all sorts, in markets all over the world, have inflated—many to a truly alarming extent. Some are already deflating, producing anti- bubbles of panic selling. Our new series ’Accidents Waiting to Happen’ will document these events as we move into the final phase of the ‘Everything Bubble’.
Accidents Waiting to Happen
Accidents Waiting to Happen- Value at Risk 'Exceptions'. -11 May 2020
We do not need further proof that VaR trading limits cannot be taken seriously.
Accidents Waiting to Happen- The US Equity Market UPDATE. -31 March 2020. As the true scale of the Corona Virus disaster became apparent, equity markets in the U.S. suffered severe 20-day drawdowns, just as we warned was likely, long before the Virus news hit the markets.
Accidents Waiting to Happen- The US Equity Market. -13 January 2020. Three very different gauges of U.S. equities, the S&P 500, Nasdaq 100 and Russell 2000 Indices have all been rising rapidly since the Fed-fuelled melt-up began last October. During 2018’s year-end collapse they all suffered their worst 20-day losses in several years, and now their 20-day returns distributions are all indicating an uncomfortably high probability of exceeding those losses. If that happens the expected drawdowns would be at a level last seen in October 2008.
Accidents Waiting to Happen- Eurozone Banks. -8 August 2019.
During the Financial Crisis of 2008-2009, most large European banks went into ‘Unstable Contraction’ — indicative of anti-bubbles of panic selling. Now, with the Euro Stoxx® Banks Index down 26% in the past year, some major Eurozone banks have entered this danger zone again. Deutsche Bank and Commerzbank have now been joined by ING and UniCredit, among others.
Accidents Waiting to Happen- Deutsche Bank -31 May 2019.
Deutsche Bank shares continue their steady decline—down almost 70% in just over 2 years. The share price went into an Unstable Contraction Mode in January of 2018 and is now almost 50% below the resulting Correction Level. Our tail model says there’s a high probability that the price will decline to less than €5. How long can the German government avoid a rescue?
Accidents Waiting to Happen- Short VIX -29 April 2019.
The Short VIX trade is back, with the largest ever recorded net short position in VIX futures1, 15 months after Short VIX ETFs were wiped out as the VIX surged by 115% in a day— its biggest up day ever. Just 6 months ago, the VIX ran up by 44% in a single day and 59% in 3 days. There’s a very high probability that those events will be repeated in spite of the ‘low volatility’ in the S&P 500 Index.
Accidents Waiting to Happen- A new series for the final phase of the ‘Everything Bubble’ -29 April 2019.
We are now in a regime were some bubbles have al- ready corrected violently with asset prices going into anti-bubbles of panic selling. Others deflated more sedately and still others have yet to pop. The extent of the coming corrections and the timing of the bubble deflation vary greatly across regions, countries and asset class sectors. Turning point indicators and very high levels of market risk indicate that the end game of the everything bubble is now presenting investors and policy makers with a panoply of accidents waiting to happen.