What Can Stop This Party?

Obviously, nothing could go wrong here.

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Trader: ‘This Has The Potential To Destabilize The Entire System On Its Own’

“But how ironic would it be, if the instrument that was the hands-down winner during the last crisis, ended up causing the next crisis because too many people were short it?”

The Incredible Shrinking Playground

“This mechanism of market functioning is a manifestation of systemic causation.”

Market Doom Loop Update: Risk From VIX ETPs, CTAs Flashes Red

It’s all about “loops” and “spirals” these days.

The Spiral: ‘History Repeats Itself And The Price Is Higher Each Time’

“Spiraling leverage cannot continue indefinitely. At some point, the bubble becomes too big and cannot be subsumed by a bigger bubble – the damage of its burst would become irreparable.”

Short Vol. Is One Big Momentum Trade

Also ensuring a rapid reversion are everyone’s favorite market doomsday vehicles.

Suspension Of Disbelief And ‘The Largest Vol Seller In The Market’

Suspension of disbelief, on the other hand, implies an active effort on the part of the person or persons in question to avoid common sense in favor of a more convenient explanation of reality.

Guess What? You Don’t Need To Be A Doomsdayer To Be Long Volatility

“And although I am not changing my tune that the US stock market is overbought and ripe for a surprise correction, I am adding a trade to my arsenal.”

‘Where The Wild Things Are’

“In a way, continued prosperity and stability in itself is destabilizing leading to riskier lending as the asset prices of collateral decline. This is the essence of Minsky’s take on financial markets.”

‘Dancing On The Edge Of Metastability’

“But what happens if there is an exogenous circuit breaker and we can no longer pretend?”

‘We Miss Volatility’ – ‘This Is A Strange World’

“We miss volatility. We are living in a strange world with lot of geopolitical volatility but it’s not in financial markets.”

‘The Automatic Flow That Poses The Most Immediate Risk Is VIX ETPs’: Goldman Takes On The ‘Doom Loop’

When the proverbial shit hits the fan, don’t blame risk parity and the trend followers. Rather, point the finger at the Target manager next door.

‘If You See A Vol. Spike, Try To Kill It, Ok? It’s Not A Pet.’

“It has been over 50 years since realized vol was as low as this year’s 7%. 2006’s 10% was the lowest SPX volatility of the lull between the dot com selloff and the financial crisis. The lowest annual SPX realized vol years on record are 1964 and 1965 with 5.3% and 6.8%, respectively.”

One ‘Ominous’ Sign For The Vol. Sellers: Fatter Tails

“Vol shorts will get their comeuppance, even if it’s later rather than sooner.”

Doom Loop Update: VIX ETP ‘Risk’ Remains High

According to the latest read on this, the potential for an ETP rebalance to cause problems is still near record highs.