1 Dec 2021

I am spitting mad, in yesterdays letter I mentioned I was short the S&P500 with a stop at 4670 well take a look I got stopped out with a daily high of 4671 followed by a major selloff. Sorry for bringing my personal baggage to the letter but having skin in the game and coming along for the journey is the best way to learn.

Take a look at the bond market volatility versus the equities. I don’t think any textbook would have predicted this and I am sure those risk parity asset allocators are getting smacked all over the park. When I look at this chart I think to myself have they got the legend labelling mixed up.

Take a look at Bitcoin correlation with traditional assets pretty low I know that more recently the correlation with Gold has picked up but nonetheless it seems to really behave like its own animal.

Closing out my commentary on crypto for today I want to share a good old fashioned valuation of some of the level 1 crypto protocols. The earnings these protocols gain is from network fees for processing transactions. ETH looks quite reasonable Solana and Polkadot on classic PE multiples not so much. I guess we can take some comfort in that they actually have an “E”.

Oil is in a bit of freefall at the moment, XLE is the CBOE Energy Sector and it is starting to turn down meaningfully.

The chart below highlights the increase in the above indexes respective implied volatility. This is off the charts (nearly).

I really am not sure what to make of this greed / fear reading. We have reversed off some extreme greed readings and are heading towards some extreme fear. While markets typically top around greed I think its quite possible that the top is in for a few months or more. This weeks trading will continue to show us the way. Trading stocks is getting exciting again.

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