I just finnished reading "Lords of Finance: The Bankers Who Broke The World" by Liaquat Ahmed last weekend. My brother had given me the book. It is an outstanding read on what happened leading into the 1929 stock market crash and what happened after and during the great depression. It talks about the central bankers and gives a great insight into John Maynard Keynes.
The reason I brougtht this up is because I started thinking about our current situation and the wreckage of the 2007 financial crisis. The events in the global economy and how it effects our banking system is fascinating. The movement of gold, the fiat monetary system, the printing of money, the current austerity programs, etc.....The fact that our labor numbers have not improved, commodities and gold have sky rocketed, and the value of our dollar is depleting. The QE1's, QE,2s, and maybe even now QE3. .... I digress....
I began looking at our market in a new light. What I saw is that we are on shaky ground and noticed the volatility index had hit near new lows even though the little "forest fires" across Europe started sparking. I pulled up the technicals and started to show a breaking down of the S&P500, the dollar, and the rapid rise in gold. I found out that Goldman Sachs is in the process of funding a 6 billion dollar " Black Swan" fund. A "Black Swan fund bets on the very small chance of a total market meltdown. They are going to be using some ETF VIX futures among other things. the fact that they can raise 6 billion dollars on a an investment that has a very low probabilty of ever comming to fruition-drew my interest. What's up? Thus comes the crux our trading strategy. We expect a huge spike in volatility in the next 2 weeks. Thus we buy the TVIX ( 2X spike in volatility)....then we may swith to the XIV ( bet against volatility) to play the opposite direction at the height of fear. Our trades will be simple in hear.
In simple terms: We are buying fear right now; We will sell fear later.
Isn't Wall Street grand?! Imagine that- ETF's that allow you to trade in emotion!
