Tag Archives: techincals

Gone Fishing Newsletter: The Inflation Edition

We are thrilled to present a recent article from Samantha LaDuc, the Founder of LaDucTrading.com and the CIO at LaDuc Capital LLC. 

Samantha LaDuc is known for timing major inflection points in equities, commodities, bonds/rates, currencies and volatility. As a Macro-to-Micro strategic technical analyst, educator and trader, she makes her insights available to active traders and investors who want to minimize risk while seizing year-making opportunities.  


Spoiler Alert: We have no inflation in commodities.

Healthcare, Education, Concert Tickets … absolutely.

Image

But what about the stuff we consume and use every day?

CRB Commodities is made up of the following weighting:

  • Softs (Coffee, Sugar, Orange Juice) 23.5%
  • Energy 17.6%
  • Grains 17.6%
  • Precious Metals 17.6%
  • Industrials (Copper & Cotton) 11.8%
  • Meats 11.8%

Commodities – Big Picture on a Monthly Time-frame – show that we are still in a multi-decade low.

“Yields have been falling, reflecting concerns about global growth, and also the dramatic change of direction by central banks, which was itself largely driven by fears for growth. The 10-year Treasury yield is now almost a full percentage point lower than it was two years ago, and its trend is clearly downward. Indeed, if we take inflation expectations into account, the real 10-year Treasury yield has just gone negative.

According to the Bloomberg commodity indexes, industrial metals have now under-performed precious metals over the period since Donald Trump was elected U.S. president; and the price of oil is collapsing anew relative to gold. These moves only make sense if people are worried about growth.” – John Authers, Bloomberg

Sounds dreary, and John’s commentary was before the CoronaVirus outbreak really grabbed American businesses’ attention.

Despite my bearish leanings as detailed here: Perfect Storm: CoronaVirus and Market Risks, from my vantage point, we ‘should’ bounce soon (yellow circle). If not, we have more serious deflation to deal with – not just disinflation in the commodity patch.

Now let’s drop the USD softly behind the same chart and add some annotations. We have potential for a bounce, but also a lot of resistance and indecision. No clean signal yet. Still chop. And a DXY that has been range-bound for 4 years! Clearly, the US Dollar makes the weather for commodities and Foreign Exchange volatility as at an All Time Low. You know my saying: Outliers Revert With Velocity. Watch the USD for The Tell.

I should also add to this Intermarket analysis with the Macro read: it’s bearish inflation.

 @ISABELNET_SA Chart is suggesting that M2 velocity YoY leads US core inflation by 21 months. It has been quite accurate for more than 20 years. And it portends lower.

Image

Commodities are Dead, Long Live Commodities?

So why fight the trend? Humor me for ‘the other side” of the argument. Let’s assume inflation catches a bounce, pulling up commodities and yields with it, what segments are most likely to rise?

Food – Softs, Grains, Meats: China is experiencing strong Food price inflation from drought conditions (Rice), culling of all that Pork (and soon Chicken?). But in the US, these input prices are declerating (Coffee, Corn, Hogs, etc). With the new Coronavirus shutting off the flow of goods into and out of China for the time-being – and I suspect until April/May – we could start to see a tick up in Food Prices. Worst case, as the pandemic spreads, people with be unwilling/unable to go to work which could also trigger supply chain constraints. Prices could accelerate quickly on supply contraction.

Energy: What’s the bull case for Energy? Oversold, “value” play with high trailing dividend yields? They are high for a reason and still major laggard of all SPY sectors for several years now. Oil investment is waning not expanding (given Trump’s energy policies). So aside from a geopolitical ‘flare’ to temporarily disrupt supply, like with Iran, the case for sustainable higher oil is weak. And if/when Venezuela comes back online, it would be a big hit to the bull case (more supply). In the meantime, we have demand destruction out of China as a result of the CoronaVirus and general trends in decreasing demand due to:

1) Deglobalization
2) Decarbonization
3) Debt saturation
4) Donald Trump

Industrials: Copper is the big one, and it is at 2016 levels, so not expressing an economic growth look. Translation: The Trump Bump (2017) has been Dumped.

Precious Metals: Here are two charts that sum up my frustration on the perception versus reality of bidding up precious metals.

(Separate from the whole Palladium and Platinum play, which I have written about since early November as a bullish thesis.)

Treasury yields are negative after adjusting for inflation so that is supposed to be a plus for gold….

But, Gold/Silver Mining stocks are looking weary and potentially rolling over.

OK, I may have talked you out of a Commodity bump, but stick with me.

Commodities, The New Bonds?

Just over a year ago, the Fed finished systematically hiking rates (after 8 of them) as ECB quit QE. Today, Fed has lowered rates 3 times in 2019 and market is pricing in 2 more cuts for 2020! Fed clearly seems to unwind their 2017 tightening to avoid what happened in Fall of 2018 where U.S. stocks collapsed nearly 20% from Oct 3 to Dec 31st. Basically, the Fed realized it had spent three years tightening into a low inflation, low growth U.S. economy, and the global economy was too fragile to handle the liquidity and tightening drain.

But rate cuts at this point have reached the law of diminishing returns and Repo operations to inject capital in the money markets seems inadequate to jump-start growth. Fiscal policies in combination may be the fuel that flame inflation, in which case, commodities could recover and rally, but there are some heady headwinds:

Headwinds:

  1. Demand destruction from slowing global growth from Coronavirus in particular, economic cycle and ‘protectionist’ trends in general.
  2. Lower yields pull commodities with it, (and vice versa), but right now Fed has their proverbial thumb on any increases.
  3. Global central banks have suppressed volatility by anchoring expectations with “lower for longer”, thereby enhancing the effect of rate cuts which suppresses commodities.
  4. A more dovish Fed also reduces the US-Foreign bond yield spread which strengthens the dollar, thereby suppressing local currency valuation while burdening thier USD funding obligations.
  5. A stronger dollar is tailwind to commodity run (inversely related since commodities are priced in USD).

Tailwinds:

  1. Local and Coordinated Global Fiscal Policies trigger global economic optimism; Debt and Deficit hawks be damned.
  2. Containment of CoronaVirus psychologically and financially allow for economic expansion. Both will drive yields higher.

Until these factors reveal themselves, yields are falling and at risk of breaking critical support.

Top 10 Reasons for Bond Reversal:

From Buy Bonds, Wear Zirconia:

  1. Yields are approaching my buy point just above All Time Lows.
  2. Bonds/Yields are on their respective Bollinger Bands/Keltner Channel bands (yellow circle on weekly chart) which often acts as resistance causing a rubberband.snap-back effect.
  3. Seasonal tendency to Sell Bonds starts Jan 31st.
  4. Nomura’s Charlie McElligott  “1m Price Reversal” trade has run its course (1.94 drop to 1.64 in 10 yr yield since Dec 18th)
  5. Duration infatuation” (the safety-trade) often kicks in at the first sign of trouble, but then unwinds.
  6. The “normal” viral drag on US10Yr has the following tendency – yields fall then bounce back sharply.
  7. Fed won’t want the yield curve inversion which already erased half of the Q4 steepening.
  8. UPDATED PRE FOMC: Fed may need to guide inflation above target … which in turn supports a steeper curve, SO there is strong potential for final 2020 rate cut to CAUSE inflation expectations to rise.
  9. And the best reason potentially of all: Stocks are now Yielding More Than Bonds Again

“In the early summer of last year, the 10-Year Treasury Note was bid up considerably, resulting in it yielding less than the S&P 500’s dividend yield. In fact, at the point of the largest divergence between the two in late August, the dividend yield of the S&P 500 was 56.9 bps higher than the yield on the 10-Year Treasury. Although the disparity between the two has shrunk from that August peak, that trend has generally continued in the months since then, though equities’ surge into the end of the year saw bonds briefly yielding more in December. Since the start of the new year, stocks once again hold a higher yield, especially today as worries about the coronavirus have resulted in the selling of risk assets (raising the S&P 500’s yield) and subsequent buying of safe-havens (lowering the 10-Year Treasury yield). Now, the spread between the S&P 500’s dividend yield and that of the 10-Year is at its widest level in favor of the S&P 500 since October 10th.” –  DATATREK

I am nothing if not persistent.

Here is my client post from January 24th on this related subject: All Alone With My Higher Yield Thesis:

High Yield corporate debt is in trouble with Oil dropping 20% since Jan 7th and Shale companies facing their biggest loan refinancing wall in 20 years. When HY credit passes 358 bp then Momentum will very likely sell off – like happened in early September 2019 – and Value will finally catch a sustainable bid! And when Hedge Funds cover their Value shorts,  they sell Bonds! And when bonds get sold, with momentum selling off too, rates rip and we have a perfect storm set up for a massive VIX spike and gamma flipping.”

That is still my baseline projection. Market just doesn’t see it yet.


LaDuc Trading/LaDuc Capital LLC Is Not a Financial Advisor, RIA or Broker/Dealer.  Trading Stocks, Options, Futures and Forex includes significant financial risk. We teach and inform. You enter trades at your own risk. Learn more.

Gone Fishing Newsletter: The Inflation Edition

We are thrilled to present a recent article from Samantha LaDuc, the Founder of LaDucTrading.com and the CIO at LaDuc Capital LLC. 

Samantha LaDuc is known for timing major inflection points in equities, commodities, bonds/rates, currencies and volatility. As a Macro-to-Micro strategic technical analyst, educator and trader, she makes her insights available to active traders and investors who want to minimize risk while seizing year-making opportunities.  


Spoiler Alert: We have no inflation in commodities.

Healthcare, Education, Concert Tickets … absolutely.

Image

But what about the stuff we consume and use every day?

CRB Commodities is made up of the following weighting:

  • Softs (Coffee, Sugar, Orange Juice) 23.5%
  • Energy 17.6%
  • Grains 17.6%
  • Precious Metals 17.6%
  • Industrials (Copper & Cotton) 11.8%
  • Meats 11.8%

Commodities – Big Picture on a Monthly Time-frame – show that we are still in a multi-decade low.

“Yields have been falling, reflecting concerns about global growth, and also the dramatic change of direction by central banks, which was itself largely driven by fears for growth. The 10-year Treasury yield is now almost a full percentage point lower than it was two years ago, and its trend is clearly downward. Indeed, if we take inflation expectations into account, the real 10-year Treasury yield has just gone negative.

According to the Bloomberg commodity indexes, industrial metals have now under-performed precious metals over the period since Donald Trump was elected U.S. president; and the price of oil is collapsing anew relative to gold. These moves only make sense if people are worried about growth.” – John Authers, Bloomberg

Sounds dreary, and John’s commentary was before the CoronaVirus outbreak really grabbed American businesses’ attention.

Despite my bearish leanings as detailed here: Perfect Storm: CoronaVirus and Market Risks, from my vantage point, we ‘should’ bounce soon (yellow circle). If not, we have more serious deflation to deal with – not just disinflation in the commodity patch.

Now let’s drop the USD softly behind the same chart and add some annotations. We have potential for a bounce, but also a lot of resistance and indecision. No clean signal yet. Still chop. And a DXY that has been range-bound for 4 years! Clearly, the US Dollar makes the weather for commodities and Foreign Exchange volatility as at an All Time Low. You know my saying: Outliers Revert With Velocity. Watch the USD for The Tell.

I should also add to this Intermarket analysis with the Macro read: it’s bearish inflation.

 @ISABELNET_SA Chart is suggesting that M2 velocity YoY leads US core inflation by 21 months. It has been quite accurate for more than 20 years. And it portends lower.

Image

Commodities are Dead, Long Live Commodities?

So why fight the trend? Humor me for ‘the other side” of the argument. Let’s assume inflation catches a bounce, pulling up commodities and yields with it, what segments are most likely to rise?

Food – Softs, Grains, Meats: China is experiencing strong Food price inflation from drought conditions (Rice), culling of all that Pork (and soon Chicken?). But in the US, these input prices are declerating (Coffee, Corn, Hogs, etc). With the new Coronavirus shutting off the flow of goods into and out of China for the time-being – and I suspect until April/May – we could start to see a tick up in Food Prices. Worst case, as the pandemic spreads, people with be unwilling/unable to go to work which could also trigger supply chain constraints. Prices could accelerate quickly on supply contraction.

Energy: What’s the bull case for Energy? Oversold, “value” play with high trailing dividend yields? They are high for a reason and still major laggard of all SPY sectors for several years now. Oil investment is waning not expanding (given Trump’s energy policies). So aside from a geopolitical ‘flare’ to temporarily disrupt supply, like with Iran, the case for sustainable higher oil is weak. And if/when Venezuela comes back online, it would be a big hit to the bull case (more supply). In the meantime, we have demand destruction out of China as a result of the CoronaVirus and general trends in decreasing demand due to:

1) Deglobalization
2) Decarbonization
3) Debt saturation
4) Donald Trump

Industrials: Copper is the big one, and it is at 2016 levels, so not expressing an economic growth look. Translation: The Trump Bump (2017) has been Dumped.

Precious Metals: Here are two charts that sum up my frustration on the perception versus reality of bidding up precious metals.

(Separate from the whole Palladium and Platinum play, which I have written about since early November as a bullish thesis.)

Treasury yields are negative after adjusting for inflation so that is supposed to be a plus for gold….

But, Gold/Silver Mining stocks are looking weary and potentially rolling over.

OK, I may have talked you out of a Commodity bump, but stick with me.

Commodities, The New Bonds?

Just over a year ago, the Fed finished systematically hiking rates (after 8 of them) as ECB quit QE. Today, Fed has lowered rates 3 times in 2019 and market is pricing in 2 more cuts for 2020! Fed clearly seems to unwind their 2017 tightening to avoid what happened in Fall of 2018 where U.S. stocks collapsed nearly 20% from Oct 3 to Dec 31st. Basically, the Fed realized it had spent three years tightening into a low inflation, low growth U.S. economy, and the global economy was too fragile to handle the liquidity and tightening drain.

But rate cuts at this point have reached the law of diminishing returns and Repo operations to inject capital in the money markets seems inadequate to jump-start growth. Fiscal policies in combination may be the fuel that flame inflation, in which case, commodities could recover and rally, but there are some heady headwinds:

Headwinds:

  1. Demand destruction from slowing global growth from Coronavirus in particular, economic cycle and ‘protectionist’ trends in general.
  2. Lower yields pull commodities with it, (and vice versa), but right now Fed has their proverbial thumb on any increases.
  3. Global central banks have suppressed volatility by anchoring expectations with “lower for longer”, thereby enhancing the effect of rate cuts which suppresses commodities.
  4. A more dovish Fed also reduces the US-Foreign bond yield spread which strengthens the dollar, thereby suppressing local currency valuation while burdening thier USD funding obligations.
  5. A stronger dollar is tailwind to commodity run (inversely related since commodities are priced in USD).

Tailwinds:

  1. Local and Coordinated Global Fiscal Policies trigger global economic optimism; Debt and Deficit hawks be damned.
  2. Containment of CoronaVirus psychologically and financially allow for economic expansion. Both will drive yields higher.

Until these factors reveal themselves, yields are falling and at risk of breaking critical support.

Top 10 Reasons for Bond Reversal:

From Buy Bonds, Wear Zirconia:

  1. Yields are approaching my buy point just above All Time Lows.
  2. Bonds/Yields are on their respective Bollinger Bands/Keltner Channel bands (yellow circle on weekly chart) which often acts as resistance causing a rubberband.snap-back effect.
  3. Seasonal tendency to Sell Bonds starts Jan 31st.
  4. Nomura’s Charlie McElligott  “1m Price Reversal” trade has run its course (1.94 drop to 1.64 in 10 yr yield since Dec 18th)
  5. Duration infatuation” (the safety-trade) often kicks in at the first sign of trouble, but then unwinds.
  6. The “normal” viral drag on US10Yr has the following tendency – yields fall then bounce back sharply.
  7. Fed won’t want the yield curve inversion which already erased half of the Q4 steepening.
  8. UPDATED PRE FOMC: Fed may need to guide inflation above target … which in turn supports a steeper curve, SO there is strong potential for final 2020 rate cut to CAUSE inflation expectations to rise.
  9. And the best reason potentially of all: Stocks are now Yielding More Than Bonds Again

“In the early summer of last year, the 10-Year Treasury Note was bid up considerably, resulting in it yielding less than the S&P 500’s dividend yield. In fact, at the point of the largest divergence between the two in late August, the dividend yield of the S&P 500 was 56.9 bps higher than the yield on the 10-Year Treasury. Although the disparity between the two has shrunk from that August peak, that trend has generally continued in the months since then, though equities’ surge into the end of the year saw bonds briefly yielding more in December. Since the start of the new year, stocks once again hold a higher yield, especially today as worries about the coronavirus have resulted in the selling of risk assets (raising the S&P 500’s yield) and subsequent buying of safe-havens (lowering the 10-Year Treasury yield). Now, the spread between the S&P 500’s dividend yield and that of the 10-Year is at its widest level in favor of the S&P 500 since October 10th.” –  DATATREK

I am nothing if not persistent.

Here is my client post from January 24th on this related subject: All Alone With My Higher Yield Thesis:

High Yield corporate debt is in trouble with Oil dropping 20% since Jan 7th and Shale companies facing their biggest loan refinancing wall in 20 years. When HY credit passes 358 bp then Momentum will very likely sell off – like happened in early September 2019 – and Value will finally catch a sustainable bid! And when Hedge Funds cover their Value shorts,  they sell Bonds! And when bonds get sold, with momentum selling off too, rates rip and we have a perfect storm set up for a massive VIX spike and gamma flipping.”

That is still my baseline projection. Market just doesn’t see it yet.


LaDuc Trading/LaDuc Capital LLC Is Not a Financial Advisor, RIA or Broker/Dealer.  Trading Stocks, Options, Futures and Forex includes significant financial risk. We teach and inform. You enter trades at your own risk. Learn more.

Bonds Are Stocks Without A Circuit Breaker

We are thrilled to introduce Samantha LaDuc, the Founder of LaDucTrading.com and the CIO at LaDuc Capital LLC. 

Samantha LaDuc is known for timing major inflection points in equities, commodities, bonds/rates, currencies and volatility. As a Macro-to-Micro strategic technical analyst, educator and trader, she makes her insights available to active traders and investors who want to minimize risk while seizing year-making opportunities.  


Don’t Overthink The Market. It’s Not That Smart.

That is what those with Consensus Opinions have done if they have stayed bullish. After all, there is evidence to support their claims:

  • Earnings on the S&P 500 almost tripled between 2009 and 2018 ($56.86 to $143.34) and the dividend grew by 144% ($21.97 to $53.61). The actual index price has more than quadrupled (4.6X) from $666 to $3060!
  • The S&P 500 index (excluding dividends) has compounded at over a 16% annual rate in that time, although the return from 2000 has only compounded 4.5% (and that is including dividends).

But there are those who feel strongly that ignorance is not bliss. We think and overthink the markets against the weight of evidence that is somewhere between Risk-Aware and Risk-Averse. It’s not a fair comparison, but I will use it anyway: Even Bernie Madoff had fabulous returns until he didn’t. In the same way, investors who are full of fear that the next correction will be “The Big One’ feel in large part this way because, like Madoff, there is no real price discovery. There is no way in fact to price risk!

As such, volumes have been historically low which means it is quite easy to move markets in either direction, especially if you are an Algo. The direction, just happens to be up. Nice for bulls that the designers of these algorithms programmed it this way! And that beats the alternative. Bears are not wishing for the markets’ demise. They are just having a hard time to trust these markets as corporate profits are declining, economic data is declining (labor market data are trailing indicators.), debt and deficits are exploding and inversion of yield curve shows big concerns from big investors.

Be Careful What You Ask For Bulls

A higher stock market could actually be its undoing. Money has flown out of equities and into bonds ever since the global financial crisis of 2008/2009, but especially since 2018 when Trump started the Trade War with China. This year has seen this trend continue:

Year-to Date (through October) Capital Flows per Bloomberg, EPFR Global

  • Cash: +$475B
  • Corporate Debt: +$320B
  • Government Bonds: +$60B
  • Global Equities: -$225B

But just as bonds have been bubbly, equities have risen in large part due to stock buybacks, fueled by cheap money made available from Fed monetary policy:

Ned Davis Research: S&P 500 would be 19% lower between 2011 and the first quarter of 2019 without buybacks. The broad market is up more than 125% in that time while net buybacks have totaled about $3.5 trillion.

So equities have risen strongly from a “generational low” in 2009 when Fed introduced QE. Combine higher earnings with consolidation of buying in Large Cap and Tech from passive investing (and a few central banks like Switzerland) and part of the advance can be explained. Include the availability of ‘cheap money’ made available from QE liquidity and Large Cap/Tech heavily weighted in the indices and we have the other part of the equation explaining the 10-year bull run. Now add in stock buybacks, which reduce the number of shares outstanding which inflates a company’s EPS contributing to its P/E expansion, which in turn triggers analysts to recommend these stocks to funds. And yet, actual fund flows favor bonds and cash over equities!

CEO Confidence is at historic lows and why wouldn’t it be? Why would they seek to expand production, risk not getting the return from that investment, when the Fed is communicating danger and Trump’s Trade War represents danger and global trade and earnings are both contracting without a trusted resolution in sight? Same thing goes for chasing all-time-highs in the stock market. So why wouldn’t both fall together in a deleveraging liquidity event?

There are plenty of wealth managers who understand this underlying dynamic and as a result have little to no trust in a market based on a closed-loop system of Fed money, Passive Investment, Algos and Stock Buybacks. Until now, there was also very little reason to jump in front of this train.

Bonds Are The New Stocks

At some point this momentum-driven bond bubble will be unwound. Granted, it is like a fully-loaded locomotive that needs miles and miles of track to even come to a stop so as not to derail, but wouldn’t it be logical, and somewhat ironic, if it is in fact higher equities that triggers the selling of bonds that causes the next market correction?

It’s going to plan perfectly when bonds roll over, structurally forcing rates to pop, then oil spikes with the Reflation trades (think inflation spike), while Momentum stocks are sold off because they’re overvalued relative to Value…and cause indices to correct. This move could be quicker than folks think as liquidity is ‘challenged’ in bonds sell off and Volatility in the bond market spills over into equities.  Samantha LaDuc 

Now let me add some more non-consensus opinion for a Bond Sell-Off: Impeachment prospects pick up and with it Elizabeth Warren’s chance of becoming President.

At risk: the practice of buying back shares as perceived by Presidential candidates to artificially raise prices for the benefit of management. Should this practice be limited or banned by an incoming President opposed to this practice – like Warren or Sanders, as both filed bills to do so and have announced as part of their economic platform in their election campaign – then the market should start to price this in. It hasn’t yet. But unlike stocks, there are no circuit breakers for bonds. And fixed income folks move together in large part so sudden moves can upend markets. Consider even below-investment grade bonds. They don’t trade anywhere near the volume the ETFs they populate. In a fast-moving bond market, those ETFs can sink hard and fast as the underlying collateral moves. But unlike their ETF equivalent that trades on the stock market with a ‘limit-down’ circuit breaker, the bonds will be under more pressure and settle with huge mark downs. Credit spreads will be widened and funding markets can freeze.


Ignorance Is Not Bliss

For over a decade, money has been coming out of equities and going into the bond market as investors continue to anticipate imminent market collapse. Investors were full of fear at the March 2009 lows and they are full of fear at the 2019 highs. Investors are so fearful that today they are willing to accept a 1.8% return on a 10-year U.S. treasury note rather than a near 2% return on the S&P 500. So in essence, ‘risk free money’ has been parked at the same time ‘risk free money’ from Fed policies of monetary easing has flooded markets with liquidity, which in turn has fueled stock buybacks and speculation.

But now there is a sense the Fed may be losing control. Now, Fed liquidity is going into Repo markets to backstop bank liquidity requirements (and concerns) to the tune of $1T to start over the next year, driving up the cost of collateral in their overnight financing activities. Fed liquidity is also needing to be printed to fund ever-growing fiscal deficits which are exploding and showing no signs of slowing. If it wasn’t for the Fed, and corporate stock buybacks, and a mountain in cash which private equity has leveraged, our markets wouldn’t be pushing through all time highs. They would be cut by a third. That is the growing body of fundamental evidence that the bears can point to when growling at the status quo of bulls’ complacency.

The great rotation out of bonds will probably be tested before proven. When bonds roll over, structurally forcing interest rates to pop, look for commodities to spike and the reflation trade to move higher in place of momentum trades. Be aware that as bonds sell off, unlike equities, they don’t experience controlled pockets of selling or slow distribution over weeks and months, and there is no backstop for ‘limit down’ selling which triggers halts. There is but one very teeny, tiny exit door. And their hedging strategies of shorting VIX will not help them. The unwind of the short VIX trade (currently at all time highs) would be unwound violently causing a sudden equity sell-off.

Forced Liquidation will beget forced liquidation in both bonds and equities. Favorites like AAPL and MSFT will need to be sold to meet margin calls. Shorting will not be a six-month ride down the waterfall like in 2008. A liquidity freeze is one thing, but a panic for USD, aka CASH, where there isn’t enough of it, globally, can morph into a liquidity flash crash event and convulse for both stock and bond sell-offs within weeks not months. Risk premiums will be so quickly elevated in this race for liquidity and in this time of quant funds and algos that even those who try to short, let alone protect, in the thick of this downdraft will be played by market makers.

And that’s why Bears are not ready to capitulate, as the risk is too great that a true liquidity crisis – for CASH – creates panic and in panic everything sells off – Even gold and bitcoin are not safe. Only those who are sitting on the sidelines will be in a position to pick up shares on the cheap.


LaDuc Trading/LaDuc Capital LLC Is Not a Financial Advisor, RIA or Broker/Dealer.  Trading Stocks, Options, Futures and Forex includes significant financial risk. We teach and inform. You enter trades at your own risk. Learn more.