11 October 2017: Freeze mode

If you are looking for answers from a Nobel prize winner on how to interpret the current state of the stock markets, we have to disappoint you. Richard Thaler, who was awarded the Nobel economics prize Monday, finds the current low levels of volatility in the stock markets the most interesting topic to apply a behavioral economics approach to. He was interviewed by Bloomberg TV yesterday. “Not that I have an answer to the minuscule volatility in the stock markets, but it is certainly puzzling. And it is puzzles that always attract my attention.” Thaler thinks that we are living in “the riskiest moments in our lives”. The Nobel prize winner admits to being nervous: “It seems like when investors are nervous, they are prone to being spooked.” He concludes that investors must be in an animal-like ‘freeze mood’, whereas running might be the better option.

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After a short break last Monday, US picked up their march north yesterday. The Dow recorded its 47th all-time peak of 2017. It closed 0.31% higher. The S&P 500 rose 0.23% and the NASDAQ gained 0.11%. Volatility eased, but the VIX prevented itself from dropping back into the single digits. It was down almost 2.5% and closed at 10.08 points. UVXY ETFs had to give up Monday’s gains (-4.4%) and closed at a level similar to the values it reached at the end of last Thursday and Friday. XIV ETNs ended yesterday’s trading session at a record high after gaining 2.2%.
Danny Daredevil took one step forward Monday and had to take the same step back yesterday. His RSS is back at 26%. Adventurous Anny is still holding cash and her RSS remained at 9%. Solid Suzy and Lazy Larry are still in a winning mood. Their RSS rose to 55%.
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

26.33%

-68.66%

-9.32%

14%

Adventurous Anny Cash 6 March 2017

9.22%

9.22%

0.67%

16%

Solid Suzy XIV 6 March 2017

54.54%

54.54%

5.65%

107%

Lazy Larry
XIV 6 March 2017

54.54%

54.54%

5.65%

107%

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

 

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Some tunes lodge in our brains and tend to stay there. They are so catchy, you just can’t get them out of your head. At the time of posting this, it is very likely that René is singing — or attempting to sing — these lines: Sailin’ away on the crest of a wave / It’s like magic / Oh, rollin’ and ridin’ and slippin’ and slidin’ / It’s magic / And you, and your sweet desire / You took me, ohh, higher and higher, baby / It’s a livin’ thing / It’s a terrible thing to lose / It’s a given thing / What a terrible thing to lose / Making believe this is what you’ve conceived / From your worst day, I’m takin’ a dive / Oh, moving in line when you look back in time / To the first day, I’m takin’, I’m takin’…
Now you may have this song stuck in your head as well. And we should have known better. After all, wasn’t that the same band that sung: And I can’t get it out of my head / No, I can’t get it out of my head / […] / ‘Cause I can’t get it out of my head, no how?

 

Picture of Richard Thaler: still from The Big Short