FOR REAL? - Are you kidding me!!? This latest move in risk correlated assets is absurd! Now, don't get me wrong. I welcome it with open arms. But I mean c'mon man! Seriously! Can someone please tell me what fundamental basis there is to be feeling good about stocks at fresh 2016 highs and within a stone's throw from the 2015 record high? There has to be a really good reason here. Hold on. I think I've got it!
UNCOMPELLING - Is it the fact that monetary policy tools are exhausted? Is it the fact that even a dovish Fed Rosengren has warned the market has been pricing a shallow Fed rate hike path that is not justified? Is it the IMF global growth warnings? Is it ongoing Brexit risk and the potential contagion? Maybe it's the dangers associated with a shaky China? Perhaps it's the sub par US earnings? It couldn't be geopolitical risk? Nope not that. No one cares about terrorism and things blowing up.
ENOUGH IS ENOUGH - So what kind of upside down, inside out, backwards world are we living in? Clearly we've been transported to Bizarro World - a world where everything is inverted and opposite to rational expectation. In my view, other than the 'there's nowhere else to put your money' and 'central banks and governments will support forever' arguments (which are of course the only arguments we should be thinking about - joking), I can't really wrap my head around it. Now again, I have been on the sidelines here. But today, I am finally dipping back in.
THE PROXY - I have gone ahead and exercised my revolt against this madness by way of the New Zealand Dollar, which I am using as my proxy for short risk. Kiwi correlates well with risk sentiment and once it all comes crashing down again, the New Zealand Dollar should be exposed. Throw in proximity to China, risks for another 50bps of RBNZ cuts, RBNZ jawboning and Fed normalization, and the trade looks promising. I sold some today and will sell more further up. Let's see.