The start of another week is upon us, which means it is time for choice excerpts from the latest letter to clients by One River Asset Management CIO Eric Peters, who today writes about Brexit, the “new generals” in the market (more in a later post), rising populism in a world of tech “monopolies”, modern day robber barons, and much more.
We will have more from today’s letter shortly, but for now here is Peters on a topic on everyone’s minds, volatility, and what Friday’s Nasdaq “air pocket” means:
“Volatility didn’t really move,” said Roadrunner, following the Nasdaq’s Friday afternoon air-pocket decline.
“There were no real flows, no one was buying options,” continued the market’s biggest volatility trader. “I’d expect this to continue for a bit at least.” These kinds of things don’t usually end in a single day.
“$100bln of tech stocks got sold and drove the Nasdaq 100 down 4% with the S&P 500 and Russell 2000 unchanged. Not sure how that happens,” said Roadrunner. “But summer is here, people leave at noon, and liquidity is thinning out.”
“The idea of a ‘new normal’ in volatility markets is utter nonsense,” continued Roadrunner. “There is never anything new when it comes to markets.”
We are just at that point in the cycle where volatility collapses – at the end, it always does. “We’re late in a bull market, and like every bull the scariest moves are to the downside.”
Nivida ($89bln mkt cap) fell 15% on Fri from intraday high-to-low, which left it +4% on the week and +46% on the year. He glanced quickly left, right, up. “And in bear markets, the most frightening moves are to the upside.”