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Very interesting thoughts. Is "VixVix" a bit like the "CDOs of CDOs" (I forget the expression) in the film "The Big Short"? The film showed Mark Baum's fear when he realized that the derivative market was 100 times the underlying markets (my memory is bad - might have that wrong). I can't remember if the film used the term "Ponzi scheme". This was a lot of fun in the housing mortgage market, should be a real scream when applied more broadly? While mainstream [social, policy] thinking is to create a stable environment, I keep thinking that "... too much stability is poison for a man's soul ..", engendering the attitude of entitlement, and the practice of bailouts, among other side effects.
PRO_Indicators
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@Bill_Howell, That's excatly it ! Same problem, just moved it to another area. 2008 popped bc of too much risk taken on housing credit. Nowaday the thing is about stock risk. Just like CDO prices back then were totally not reflecting the real risk of the associated credit package. Just replace Subprimes bt ETFs and CDOs by Puts&Calls and you've a got the next speculative bomb ! I can definitely tell you that there will be a crisis over this topic in the future ! When remains a tough question. It was just for an information purpose. Just saying that for now on we cannot use VIX as a true risk marker. That's the only reliable information that you can use immediately. The rest is just to bare in mind, avoiding to be too much invested into ETFs, a bit is OK of course.
Bill_Howell
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@PRO_Indicators, Then based on "The Big Short" film (Michael Lewis' book) you are kind of like ?Michael Bleury?", who was among the first to identify the problem, do real research, and [designed, established] the whole category of housing mortgage shorts. Then Vinnie ?? of Deutcsh Bank sets up a concept which is accidentally overheard (via wrong phone #) by Mark Baum's group (Morgan Stanley associated gang of renegades), and two young guys (Ben & ??) from Colorado hear about it in specialized financial newletters. All four groups had the same problems :
- they had to act very fast, before everybody else jumped on board, which would have ruined the paybacks
- [long term, dishonest] valuation by the issuers of the shorts, lasting well after the onset of the crash
- they were able to cash in only a fraction of what was due, and only AFTER the issuers had dumped their stake on an [unsuspecting, misled] public in what was likely [criminal, civil] breach of trust
But in my opinion, by FAR the most important point (either Vinnie himself or author Micahel Lewis) was the actual reason for the insane market behaviour - STUPIDITY by essentially all of the [professionals, intellectuals]. The film echos my thinking from at least 1988 about [government, academic] science researchers in my [secondary, non-expert] areas of interest : [fundamental theoretic physics, astronomy, geology, climate, etc]. I don't get quite the same feeling about my priority hobby R&D focus (neural networks), perhaps because it hasn't had time to develop such problems in the extreme, but more likely because I am the idiot.
Figure this out - and bag a few trillion$!!!???
PRO_Indicators
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@Bill_Howell, I absolutely don't see things this way... Even if this movie can be used to compare... things are always different and never replicates as copy paste. I see patterns and similarities, that's it ! But if I had to give you my understanding of the film, the only information i take out of this is that fighting is stupid, building an entire portfolio about one big scenario of corruption and lies. This is smthg that can be morally seen as "good trading". But in the reality those who play this are in an endless paintrade before they get proven right. OK... but what's the point, the only thing I do personally is making sure I'm not too much exposed to stocks because they're the risky assets of the next big crisis, but still... atm the paradigm of "CB can save price from every major economic downturn" is still at play. Therefore i'm following the paradigm trade as long as it doesn't burst. I bought the lows as this was my plan... I cover the portfolio when I see risky potential areas. That's it. I also changed smthg else to my trading behaviour.. trying to avoid trading derivatives making my cover trades ONLY with futures contract and limiting as much as possible trading CFDs. And for the cover trade, I also make sure to trade broad and liquid instruments (only s&p500).
Bill_Howell
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@PRO_Indicators, Great comments, thanks for the perspective, and I like your points.
ralf66.thomas
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isn’t the same thing happening in Crypto market with BTC and all the Margin trading on BTC? Volume is much smaller but it seem to follow same logic an even in an unregulated market ...