Yes indeed the Fed is determined savers will never again make a fair rate of return. Ever! They are creating an epic bubble.
More than 100% in at 30, you have a set of grapefruits. That pays off and you will be making the rules.:)
There have been several articles on the Shiller PE lately, three times in history that it has been this high. Will let you guess the years. There is also a lot of happy talk on CNBC.
It has a feel that people are throwing in the towel and buying, but I am still at a loss for where else money will go.
Last month's cycle was 5 weeks. These are the data 4 weeks prior to Aug expiry.
Jul 23, 2014 Jul 24, 2014
VIX 11.52 11.84
M1 13.0500 13.2000
M2 13.8500 14.0500
Aug 22, 2014
Both M1 and M2 might drop 3-3.5% this week without change of VIX leading to an equivalent pop in SVXY and a 6-7% drop in UVXY.
Russia withdrew without incident. Merkel is saying no more sanctions. The big delta between spot and the first month should close this week. Spot VIX might go below 11. So will it be time to sell?
I have roughly one third of my account in XIV. If we get that long awaited correction and XIV somehow dropped back to low 30s I would go more than 100% in.
It doesn't make sense to me how someone is paying these kind of prices for stocks but none of us makes the rules!
For the record here, and to repeat myself more than 5 times, i believe normal market corrections will serve to temper svxy/xiv rise so i am not in the camp that thinks there is little short/mid term risk here.
The question i ask is why would people want to take on that much risk (here and now) despite it being profitable for a long while now when you can simply do less risky trades that have a risk-reward that i think most people would favor if given the option before hand, explained in that context.
Do I think my advice goes for everyone and all cases?
If you could replenish everything you could possibly lose, in a month of work, then roll the dice. If you're wealthy and are playing with a small portion of your net worth, then sure, roll the dice. Be a gambler with insignificant money if you want to and have a little fun if you're so inclined.
The thing is i do not think most people fit this bill and are gambling with their future retirement. Money they NEED.
"...frankly don't know why he cares if we all lose our shirts.."
What would i gain from your loss?
I've chuckled quite a bit a lately when I think of a fellow that posts on this board. I forget his name now but he asked that how could it be that svxy could rise to $XXX.. His point was that mathematically there just wasn't enough people/contracts/whatever to achieve such a lofty number.
His question was "who's on the other side?"
The "other side" in etf-land is long vxx, Yet take a look at it. It's lost how much $$ for people? Look @ the NAV. It's still Huge!
So clearly a LOT of people are willing!
Why i chuckle is, I AM ONE OF THOSE PEOPLE! Yes, I REGULARLY lose money being long front month volatility. (Futures)
For what I do, i NEED to be long M1 VIX most of the time.
The reason i take this seeming counter-stance to most of you is the term structure work i have done.
I toss this stuff out for the readers benefit. If they're willing to do some work, maybe they'll get something out of it. What i won't do because it has too much value, is give out the why's and how's of exactly what i do. I get paid for that. What i will do is help those willing to help themselves.
Yes, I agree, not an attack at all. Just very subtle advice. Joey likes to drop hints and let us figure out what he means (eg "don't fly too close to the sun"). If you read all his statements together you will sense a theme: keep some cash on hand, and hedge against the downside. I frankly don't know why he cares if we all lose our shirts, but it's nice of him to help. I have applied his advice in this way: instead of swing trading SVXY, I buy twice as many SVXY calls as I do puts. This was suggested here as a viable strategy, buying one year out. I don't like going out that far. I feel that six months is far enough. Then I leg in (buying the puts when SVXY is doing well, and the calls when VIX spikes). So far this seems to be working for me. I don't intend to hold to expiration, I will roll them forward as the opportunity arises. It is definitely less capital intensive than the buy and hold approach, so I can keep extra cash on hand (I know that will make Joey happy).
There are any number of sectors/markets that peaked around 2011 and have been going down ever since. Somebody bought the top tick on those and probably felt pretty good at the time.
My questions would be should someone be fully invested at this time? What percentage of a total portfolio would you allocate to SVXY?
Over the last 2 years, it seems that we get at least a 20% draw-down every 2 months.
Will this continue- who knows for sure.
But, you have Jackson Hole speech tomorrow (my feeling a non event), September (worse month of the year for the market) and the November mid term elections. Not to mention any Geo-Political crisis that may arise.
While things can go smooth for a while, it seems to me that there are still bumps in the road.
And what exactly is your evidence that "the big one" is coming? Everybody and his mother knows that stocks are wildly overpriced and yet they go up every day. This could go on until Dow 100K in a straight line for all you me or anyone else knows.
Difference between spot and first month is pretty wide. About 15%. Futures buyers do not believe the low level of the spot obviously. If the VIX stays sub 12 until the expiration of the September futures, SVXY could see mid 90s by September end. Big if of course. I said I sell at 90 but maybe I will get greedy after all.
Bustin is right, you have been talking many people off the ledge for quite some time.
Having people still make gains on volatility, but keeping away from the large drawdowns is the key.
I am sure the buy and holders did not like the SVXY move from 93 down to less than 70. And this move happened when the S & P was down less than 4%
What will happen to this fund if/ when the S & P has a correction (10%) or we get a large Geo-Political event (Russia finally invading Ukraine; another terrorist attack in the USA).
Key is to make the gains while you can, but always be able to protect your downside.
Always better to sell when you want to, not when you have to. Given your gain, I would still explore "collars" which would let you participate in further gains, while limiting your downside. I have done similar with S&P puts and a Bear Spread on the RUT to protect a portion of my indexed portfolio.
Either way, giving it all back does not seem like an option.
On the plus side for the market the only thing I can come up with is near zero rates. Cash just seems to burn a hole in the pocket. I have been buying in some beaten down markets with the expectation that if the US markets fall I will likely be sitting on a loss. Also some short term TIPS, but yuck.
On the negative side, everything else seems so good. Corporate profits, net worth, IPOs, M&A, margin debt, yield on junk, all seem to be at or nearing levels that indicate utopia from here on out.