The Next Ice Age

We are very skeptical of the growing opinion that high volatility is here to stay. Since Aug 10, the capital markets have been a schizo-day traders dream. We have kept a close eye on the 5 year while most moved on to sexier products. The 5 year completed a move to the downside yesterday that dated back to Aug 10. We are now leaning toward the view that the edge of the new Ice Age is upon us.

We have been vocal critics of the idea that "stability" is a policy objective. In fact, stability discussions are inversely correlated to the reality. However, much of the chaos in capital markets over the last 2.5 months was the product of expecting too much earlier in the year. Getting it wrong is a violent process. Fortune tellers from Nostradamus on have become famous by merely characterizing the present situation in terms of something yet to occur. Many are prognosticating this concept now.  I am reminded of an old X Files episode where a real seer was murdering the fakes. The last thing he would say before killing them was, "You should have seen it coming."

Developing, fluid, fluxing.

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