That’s the only way to describe it.
If today’s missive is a little shaky or disjointed, it’s because I’ve been running on adrenalin for 15 hours flat, and I’m feeling a little exhausted.
We are in the midst of a period of financial history that will go down in the history books.
At this year's Sohn Investment Conference, Dan Sundheim, the founder and CIO of D1 Capital Partners, spoke with John Collison, the co-founder of Stripe. Q1 2021 hedge fund letters, conferences and more D1 manages $20 billion. Of this, $10 billion is invested in fast-growing private businesses such as Stripe. Stripe is currently valued at around Read More
I’ve spent the last 15+ hours trading and messaging with a good friend who’s one of the best traders I know. I’m now taking a break to pen this before getting back to European open. I don’t expect to sleep much tonight.
Traders love volatility and what the markets delivered today has been nothing short of freaking AWESOME.
The volatility has been absolutely stunning and the trading opportunities have been popping up like moles in a super charged game of whacka-mole. Except that the moles can bite your head off if you’re not to careful.
As a teenager only just getting interested in financial markets, I’d dreamt of events such as this.
It’s somewhat surreal as we read the stories, search through the history, analyse the charts, the numbers, the ratios, and myriad other pieces of the puzzle; and so to be applying skills as this unfolds in real time is truly mind blowing.
But first let me give you a taste of the fun experienced:
- The GBP/USD saw 20 point moves throughout the day and as the news broke the pound sterling became the sterling pounded. It has now fallen below its 30-year trend line at 1.37. Take a look at this chart and tell me the efficient market hypothesis works.
- Then gold bolted $70 in the space of 3 hours:
- Bitcoin lost roughly $200 over the last few days and then rallied $100 within the day
- The Japanese yen rallied and most stunningly the 30 year JGB printed at 0.145%
- S&P futures are halted for trading limit down.
As the day progressed, in between watching positions I snapped some of the flow on Twitter.
The most seasoned of traders were in shock and awe. Even George W. couldn’t produce this much shock and awe.
Certainly no run of the mill day…
And as I write this, Asia is closing while Europe opens. It’s going to be a long night.
Recently I gave up something which had been very special to me. It was my baby for a long time and today I know with certainty that it was the right decision.
The macro landscape is shifting underneath as at warp speed, and in today’s world capital shifts in minutes. With the Blockchain it shifts in seconds.
The politicians and central bankers are increasingly behind the curve, scrambling to catch up and each and every turn sees them exacerbating and compounding problems.
Brexit should stand as a wake up call not only to central bankers but to the political class globally.
As I mentioned in this week’s “World Out of Whack”:
The vote to stay or leave the EU is as much a vote for or a rejection of the establishment than any other European or British referendum I can think of.
You know when you tell your wife that you forgot to put dinner on because you were too busy doing something else and she completely loses the plot?
Well, from my experience – and I’m quite experienced – it often has more to do with the fact that I’ve annoyed her with something else as well and it’s not actually got all that much to do with dinner.
Sometimes the market reaction to an event rather than the event itself which matters more. This is what we’re seeing now.
This isn’t about Britain as much as it is about a global anti establishment uprising. The British people opting out of the EU is a profound statement to that effect.
I think it’s fair to say that the extent to which the markets have been reacting indicates just how incredibly fragile they really are.
As I mentioned on Wednesday:
As traders and investors it’s of no consequence what we may wish to happen. As incredibly important, wonderful, talented, intelligent, good looking, and well deserving readers of Capitalist Exploits are, the market doesn’t actually give a toss about us. Depressing, I know. But what actually takes place and how that affects asset prices is what matters.
Over the coming months and years ahead, this is bearish for the euro far more than it is bearish for the pound. This is a vote of no-confidence in Europe and a vote of no confidence in the euro. I really can’t find any reason to be long the euro at all. All the duct tape in the world isn’t going to hold the EU or the euro together.
The illiquidity that will now wash over other asset classes promises to be extreme.
Some questions that I think are worth asking yourself:
- Is this the sudden and immediate drying up of the huge amounts of capital that have been pouring into Silicon Valley and VC in general which I’ve been so concerned about? Nobody is going to want to be illiquid.
- Do you want to be in small cap stocks which can suffer illiquidity gaps or do you want to be in large cap stocks?
- How do you weight protection and liquidity in your portfolio?
- Are you going to want exposure to emerging markets in a global risk off environment?
- What do you need to do to prosper in this environment?
Capital is shifting right now at lighting speed and fortunes are being made and lost. Today was an awesome day for my buddy and I but I’m always aware to manage risks.
If markets continue in a fashion that is even a fraction of that which I’m watching on my screens now, then it’s a foregone conclusion to me that we’ll get a stimulus package to meet all stimulus packages. They’ll probably even call it something unique by picking letters out of a Scrabble bag but it’s coming regardless.
This will set up some fantastic trading opportunities and may well be the last “hurrah” that pushes the debt burden of sovereigns to breaking point.
Books will be written about this period of time. Count yourself lucky to be alive witnessing it in real time.
“With markets having wrongly bet on a Remain win in the past few days, and with patchy liquidity sure to amplify price movements, there will be severe pain for levered long investors and, potentially, opportunities for cash rich ones.
Artificially-elevated financial markets were at the risk of either a policy disruption or a market accident. Brexit could well turn these two risks into reality.” – Mohamed El-Erian, adviser to Allianz and former co-chief executive of bond manager Pimco