This is amusing way to start your Wednesday.
It was less than 24 hours ago when Bloomberg contributor Cameron Crise declared that “we’re in risk-off mode,” and investors should “grab profits where they can.”
As we noted, “it didn’t take much in terms of wobbling markets to bring out the warnings from all corners of the financial world.”
Well this morning, former FX trader Richard Breslow is out reminding us that the reality of the situation remains this: ” from a trading perspective… asset prices have done little wrong.” More specifically, Breslow says “there’s little to suggest we’ve been living through anything approximating risk-off mode.”
Below, find his full Wednesday missive.
Analysts Who Need to Be Miserable to Be Happy
I don’t know what kind of a market environment we’re eventually going to be in, but there’s little to suggest we’ve been living through anything approximating risk-off mode. If it has looked like that to you, you are going to have a really uncomfortable time of it, if and when, markets are allowed to trade in a two-way manner.
- I accept and agree that there are oodles of valuations that seem stretched. That there’s plenty of reasons to be concerned about all sorts of issues. I wouldn’t argue that caution may be warranted, especially for the retail investor. But so far, from a trading perspective, it’s just conjecture. Asset prices have done little wrong
- The analytical response continues to be that there’s no risk-off or risk-on. There’s calamity versus the divine right to have everything go continuously higher. We decry the greater-fool investor and then furiously bemoan his absence when there’s no one willing to cross the spread and pay your offer at every price point
- If you need to hate equities, at least let them take out the 55-day moving average. It’s moving up anyway. Know why? Because prices have gone higher. If they are going to collapse, missing the first one percent is a reasonable price to pay
- Do the exercise with other assets of your choice. U.S. high- yield OAS spreads tested and held a beautiful trend line. Ten-year Treasuries are trying to turn 2.30% into a quadruple bottom. If they break, they break. Pre-emption sounds an awful lot like presumption
- Is the rest of the global carry trade really dead because South African politics is a mess? Only for a trade. Maybe. And the people running for cover were probably in these trades because the charts looked good and they were being sold on the notion that nothing could go wrong. Everyone’s doing it. Remember that wrong and dangerous nonsense that politics or terror don’t matter to traders? Welcome to a crowded emerging market trade
- We should institute a rule that says you can’t put on an emerging market carry trade unless you can find the country on a map and name its capital
- And when something does happen that really shakes up markets, ignore the person screaming, “I knew it”