2 June 2017: Black swan

The last recession (which was named ‘The Great Recession’) ended in June 2009. It was the longest recession since the second World War, as it started in December 2007 and lasted 18 months. It was longer than the 1973-1975 and 1981-1982 recessions which lasted both 16 months.
It has been exactly eight years since the end of that last recession. Should we be prepared for another recession? Statistically, on average, every 63 months a new period of recession takes place. From that perspective, the current period of expansion is long overdue. But the present conditions do not point in that direction: volatility is low, the economy is expanding but not overheating, interest rates are at a low level, stock prices are high but not dangerously high.
From what we know about the causes of recessions, there seems nothing to be worried about. The problem is that history has taught us that in most cases a recession was caused by something we had not encountered before. These unknown circumstances are nowadays referred to as ‘black swans’. So, if you spot a black swan, be quiet about it, sell all your stocks and wait for the recession to kick in.

All three major US stock indexes closed at records Thursday as data on private-sector employment looked good. The S&P 500 gained 0.76%, the Dow added 0.65% and the NASDAQ was the best of the three: +0.78%. Volatility eased and the VIX sank again under the low level of 10 points, closing at 9.89. UVXY ETFs had to take a major step back: -4.73%. XIV ETNs profited and gained more than 2.5%.
Danny Daredevil had to pay the price and his RSS dropped to 374%. Adventurous Anny is holding cash and her RSS remained at 39%. Solid Suzy and Lazy Larry finally took the 20% barrier as their RSS closed at almost 22%.
None of our models gave a trading signal at the end of yesterday’s session.

 

Model Holds Start date

RSS

YTD

QTD

AAR

Danny Daredevil UVXY 1 January 2016

373.82%

17.54%

1.08%

199%

Adventurous Anny Cash 6 March 2017

39.23%

39.23%

14.33%

295%

Solid Suzy XIV 6 March 2017

21.97%

21.97%

11.37%

128%

Lazy Larry
XIV 6 March 2017

21.97%

21.97%

11.37%

128%

RSS = Return Since Start | YTD = Year-To-Date | QTD = Quarter-To-Date | AAR = Average Annual Return

 

René’s Reflections @ Friday: Slow traveling

Today, I will arrive in Florence, Italy, to visit an exhibition of my friend Ramón, the art painter whom we wrote about in our blog post of 26 January this year. I chose not to travel by plane this time, as I had my fair share of flight hours as recent as last month. Apart from that, traveling by car, or ‘slow traveling’, has its merits. When traveling by plane, there is only the point of departure and the point of arrival. In between, there is just the sound of the high-pitched jet whistle and the bright light of the sun, shining on the top of the clouds. It makes you wonder, how many beautiful places you pass by, unknowingly, at an altitude of 30,000 feet.
Slow traveling is more about the travel, than about the destination. It gives you a better sense of distance, brings you in touch with the changing landscape, culture and foods, and most of all, it makes you more aware of the fact that you are traveling. Next time you travel from A to B, take some time to discover the pearls that are hidden in between. You will find out that it is worth the effort.

Kempten, the largest town of Allgäu, Bavaria, Germany. Photo taken last night

Dolomites, Italy. Photo taken this morning (local time)