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Risk parity fund unwind tipping point
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Risk parity fund unwind tipping point

  #41 (permalink)
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Thanks Jack and Suko for your insights into the VIX and Vix structure.

Yesterday I worked on:
when/if a dramatic fall happens would the incidence of down days be greater?

It was but not as much as I thought.

The tricky thing about day-trading is that you need to be more precise and longer-term structures are not as important to the pay-off.

There are several ways of measuring if a day is a "down" day versus an "up" day.
  1. close to close
  2. open to close
  3. Yhigh to High and Ylow to Low
  4. First end (FE) to Second end (SE) - which I abbreviate "dir"
and so on.

For day trading it seems the last is the more important metric.
So if the HOD was before the LOD then the FE to SE = down ( and vv) - see Note1.

here is the second of the two dramatic falls in the post above - Jan 2016.

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Note1. If there is an exact double in either HOD or exact double in LOD then I record the first swing as the "dir"
so that is a V day would be recorded "down" and a Caret day would be "up".

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Last edited by aquarian1; January 21st, 2017 at 02:54 PM.
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  #42 (permalink)
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Jan 2016 fall analysis

In the above we have 3 up and 10 down for +104 and -356 totals respectively (summing to -251.75) in a total fall of 270pts from peak to trough.

(eg. 30 Dec 2015 the dir = -15)

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  #43 (permalink)
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The US has not paid enough respect to China's military. Senior US officials of the Asia-Pacific command frequently show their intention to flex their muscles with arrogance. The Trump team also took a flippant attitude toward China's core interests after Trump's election win. Enhancing communication and mutual understanding is not enough. China must procure a level of strategic military strength that will force the US to respect it.



A China with or without the Dongfeng-41 is different to the outside world. That is the significance of the Dongfeng-41. We hope this strategic edge will be revealed officially soon. It will not bring the China Threat theory, but will only add authority to the People's Liberation Army.

While Trump has had a busy morning, dismantling Obama's (and Warren Buffett's) anti- Keystone pipeline legacy, and has hardly caught up with the latest news out of China, we are curious how the US president will react - either on Twitter or otherwise - to the knowledge that what until now was a diplomatic "war of words", has not so quietly spilled over into what appears to be another nuclear build up arms race.
China Deploys ICBM System "In Response To Trump's Provocative Remarks" | Zero Hedge

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  #44 (permalink)
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PEs at 2000 and 2008 highs

Here are InvesTech's stats:

The current P/E ratio of the S&P 500 at 25.5 is well above the long-term average of 17.1. In fact, the only times that this ratio has been significantly higher than today were during the Technology Bubble of the late 1990s, together with the distorted period in the subsequent recession, and the 2008-09 Financial Crisis (see graph below). Part of the stimulus for the latest rise in valuations is a market expectation for higher earnings power in the years ahead. However, much of that future growth is already priced into the market and current high valuations must be considered a longer-term risk at these lofty levels.

That said, in a world in which 80% of central banks said they plan on buying more stocks this year, why bother with such trivialities as "valuation" or analysis, when cost-indescriminate central banks who literally print money to buy equities, are perfectly happy to take your stocks off your hands at any price.

source:
How Much Longer Can The Market Go Without A Correction | Zero Hedge

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  #45 (permalink)
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central banks covertly buying stocks

Regular readers remember how, when we first reported around the time of our launch eight years ago that central banks buy stocks, intervene and prop up markets, and generally manipulate equities in order to maintain confidence in a collapsing system, and avoid a liquidation panic and bank runs, it was branded "fake news" by the established financial "kommentariat." What a difference eight years makes, because today none other than the WSJ writes that "by keeping interest rates low and in some cases negative, central banks have prompted some of the most conservative investors to join the hunt for higher returns: Other central banks."

To be sure, nothing that the WSJ reports is news to our readers, who have known for years how central banks overtly, in the case of the BOJ, PBOC and SNB most prominently, and covertly, as the infamous "leave no trace behind" symbiosis between the NY Fed and Citadel, however we find it particularly enjoyable every time the financial paper of record reports what until only a few years ago was considered "conspiracy theory", and wonder what other current "fake news" will be gospel in 2020.
source:
80% Of Central Banks Plan To Buy More Stocks | Zero Hedge

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  #46 (permalink)
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continued

ďWhen yields started to get really low and closer to zero in 2014, we decided to start equity investments,Ē said Jarno Ilves, head of investments at the Bank of Finland, who said he plans to increase his allocation to stocks.

But if you think the farce is bad now, wait until next year. According to a recent study by Invesco on central- bank investment which polled 18 reserve managers, some 80% and 43% of respondents to questions on asset allocation said they planned to invest more in stocks and corporate debt, respectively. Low government-bond returns were behind the moves to diversify, said 12 out of 15 respondents, while three declined to answer.

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  #47 (permalink)
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DB warns of global economy fall

DB
And with global macro surprises close to their all-time high - much of which has been predicated on the relentless debt-creation by China which just got instruction to slow down dramatically in the current quarter - the DB strategist says they are likely to roll over from current elevated levels, resulting in a slowdown in global growth in the coming months.

source:
Deutsche Warns Global Economy About To Roll Over, Says "Sell" | Zero Hedge

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  #48 (permalink)
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aquarian1 View Post
Here are InvesTech's stats:

The current P/E ratio of the S&P 500 at 25.5 is well above the long-term average of 17.1. In fact, the only times that this ratio has been significantly higher than today were during the Technology Bubble of the late 1990s, together with the distorted period in the subsequent recession, and the 2008-09 Financial Crisis (see graph below). Part of the stimulus for the latest rise in valuations is a market expectation for higher earnings power in the years ahead. However, much of that future growth is already priced into the market and current high valuations must be considered a longer-term risk at these lofty levels.

That said, in a world in which 80% of central banks said they plan on buying more stocks this year, why bother with such trivialities as "valuation" or analysis, when cost-indescriminate central banks who literally print money to buy equities, are perfectly happy to take your stocks off your hands at any price.

source:
How Much Longer Can The Market Go Without A Correction | Zero Hedge


But PE ratio was also about this level right before the tech bubble....see graph from ZH. Not sure why one data point is chosen to interpret vs. another. Makes interpretation irrelevant.

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  #49 (permalink)
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jackbravo View Post
But PE ratio was also about this level right before the tech bubble....see graph from ZH. Not sure why one data point is chosen to interpret vs. another. Makes interpretation irrelevant.

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That is exactly what makes the interpretation relevant and the point of the article.

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  #50 (permalink)
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aquarian1 View Post
That is exactly what makes the interpretation relevant and the point of the article.

Well- there was 5-10 years of bull market after the high PE in the early 90s....so, ZH is predicting a crash in 10 years from now? It doesn't make sense to point out a PE of 25 and say market is overvalued and might crash, but might happen in 10-20 years from now. It's all just propaganda. The way I would interpret that graph would be, well a high PE of 25 might get us another 5-10 years before a downturn.

Or maybe the real way to interpret that graph is PEs are irrelevant to market fluctuations and don't help forecast upturns or downturns.

EDIT: also, just wanted to point out that at no point has the article treated the data in a rigorous statistical manner. It just pointed to a chart and said see this, it could be bad. You seem to highly regard stats and precision when it comes to numbers; I'm surprised you give any of those ZH articles any credence.

I enjoy your stats on the ES thread by the way.

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Last edited by jackbravo; January 27th, 2017 at 06:22 PM.
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