David Stockman: ‘Goldilocks’ Is A Figment Of Your Imagination
“That was fast.”
“That was fast.”
“Last week’s twin 1,000 point plunges on the Dow were not errors.”
Farewell to Kansas.
So watch bonds. And the dip buyers. Oh, and maybe Bitcoin, too…
Is this it?
Look, I realize that pounding the table on forced unwinds by vol.-sensitive investors during the recent acute pickup in volatility is quickly becoming an exercise in dead horse beating. But…
“There had been a lot of complacency built up in markets over a long time”…
This is a particularly touchy subject under normal circumstances and this week is not a week that falls in the “normal circumstances” category, which means this debate is even more contentious than it usually is.
Is inception possible?
“Come play with us Danny”…
Listen, Ray Dalio has a set of “principles” ok?
“But last night some strange riders were spotted galloping eastward from China and Japan. While their visage may be somewhat foggy to the uninitiated, the boys and girls on Wall Street are about to discover that it’s not exactly Big Bird swooping onto their playground.”
Who’s afraid of a multi-asset drawdown catalyzed by a bond tantrum in 2018?
Super bullish with (more than) a hint of tail risk.
“The major opposing forces in 2018 will be contracting global liquidity vs synchronized global growth. Our view is that the former will be the bigger force, and will drive asset returns in 2018.”
It’s like Bigfoot. Or Nessie.
Obviously, nothing could go wrong here.
All’s well that ends well in Japan after a six-day slide. Or maybe not.
“It could happen tomorrow given the extreme expense of US equities and the near universal consensus of a continued acceleration in the economic cycle despite the Fed also in the midst of a tightening cycle.”
“This is really just one manifestation of the more earthly, you can’t fight city hall. A twist in a post-vigilante world, which can’t bear not to believe that the authorities will deliver what our financial market investing thesis requires, while at the same time being utterly incompetent.”
“Bridgewater is a secretive and eccentric firm and I let my suspicions of that get in the way of our ordinarily comprehensive due diligence.”
Just to be clear, Goldman doesn’t think anything too bad is likely to happen, but the overarching point of everything said above is that if the question you want to ask is “what could go wrong?” the answer is: “a lot.”
And what does Kolanovic think the next crisis will look like? Well, “the next crisis’s main feature will be severe liquidity disruptions resulting from market developments since the last crisis,” he says.
“But I wonder if Ray Dalio’s retirement was equally smart. Could he have timed it perfectly? Did he retire like Michael Jordon after sinking the jump shot in the dying seconds to win the series?”
So enjoy reveling in our confirmation bias and don’t forget to laugh at the characterization of inverse VIX ETPs as sources of “stable” carry…
“With the Fed’s balance sheet poised to contract and financial conditions set to tighten either steadily or abruptly, we fear gold, fixed income, and equity asset prices may suffer a sudden drop.”
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