MARCH 19, 2020: 9 Quick Points

March 19, 2020

RGN Market Observations

  1. Dramatic central bank action likely – may be something new, could be very bullish for stocks, be a huge mover for fixed income and FX (trends not necessarily clear either), several rounds
  2. Vol/Insurance is very expensive now. Like GFC, will be hard to make money buying puts/buying vol
  3. With rates so low, strategies which profited from late-2008 GFC fixed income rally (e.g. macro/CTA, risk parity) may not have that opportunity again (it already happened)
  4. Realized volatility is at extreme GFC levels, enormous opportunities in short term trading (for us, best conditions since our top-of-class +53% 2008)
  5. Safe harbor assets (Gold/BTC/US Treasures) often dropping with equities (like today) as people raise margin money. Stock/bond (60/40 and risk parity) correlation may be positive! Watch for potential risk parity deleverage sending stocks and bonds down!
  6. Our Diversified Program is up >30% YTD through yesterday (abs return+downside protection focusing on 1-2Day duration futures trades, 18% Vol)
  7. Our Smart Alpha Program is up 17% YTD through yesterday (balanced, loves realized volatility, trades only FX and rates, 10% return, 10% Vol, neg corr to stocks bonds and hedge funds). -2% in 2019, +27% in 2018 [2-pager attached]
  8. We make money in periods of financial market stress. After 12 years of declining stress, we are now in a rising stress period. Our white paper shows how Financial Market Stress drives stocks, bonds and HFs in the same direction (now: down). Link here: Market Stress White Paper.
  9. Let me know if you’d like to see a full deck on our programs. No end in sight for this period (no easy way out anytime soon)

Cognitive Biases we’re avoiding right now

Wishing your family friends and colleagues safety, strength, isolation, and profits.

Virus prep plan link HERE

Best regards,