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“One Of The Biggest Fears I Have Is I Miss It”: There Is A Sudden Rush To Open Long-Vol Funds

Last month, Soc Gen analyst, Praveen Singh, analyzed evolving cross-asset volatility trends, and boldly went where so many have unsuccessfully gone before. Singh’s warning was that the market is now entering dangerous volatility regimes.

The crux of Soc Gen’s argument was mean reversion, notably that the current low level of volatility happens less than 2% of the time for equities. Furthermore, Soc Gen found that when equity volatility has been this low in the past, it went on to rise by 3 points in the subsequent 12 months. This means that volatility is more likely to go up than fall further from current levels… at least in theory.

Portfolio managers, however, are increasingly thinking along the same lines. While it’s rumoured that Brevan Howard will shortly launch a long volatility fund, according to a Bloomberg it appears that there is a surge of interest in launching long volatility funds.

According to Bloomberg Brevan Howard Asset Management, 36 South Capital Advisors, One River Asset Management and at least three other firms are rolling out new funds designed to protect investors from rising market turbulence.” Former SAC Capital’s, Hamming Rao, opened a volatility fund with a long bias this June, based in Florida.

While buying volatility has been a widowmaker trade in recent years, the fund managers Bloomberg spoken to by Bloomberg couldn’t be more optimistic: Jerry Haworth, the co-founder of 36 South who “tripled investor’s money” during the GFC, launched the Lesidi Fund earlier this month. Haworth commented “This is a multi-decade opportunity to buy volatility’…To increase the appeal of his long-volatility strategy, Haworth focuses on reducing the ‘negative carry,’ or steady bleed of cash, that accompanies calm markets. That’s gotten easier these days as prices for options and other volatility-linked derivatives have fallen.”

In a similar vein, Michael Preiss, a portfolio strategist at $1.9bn Singapore-based Taurus Wealth Advisers argued “The most mispriced asset class in the world is volatility…a bunch of our clients are in discussions with us at the moment about whether to add volatility strategies.”

“The opportunity is right now. One of the biggest fears I have is I miss it.” according to Arun Singhal of Astrid Hill. Singhal expects to launch a  volatility fund before year-end with an initial target size between $50 million and $100 million.

The conundrum for investors was perfectly explained a few days ago by the new Nobel laureate in economics, Richard Thaler “We seem to be living in the riskiest moment of our lives, and yet the stock market seems to be napping.” Of course, we can point to all manner of risks which could have major knock-on effects in financial markets, North Korea, Brexit, Peshmerga, several major European banks, China’s credit bubble, etc.

However, since central bank policies are the major reason for our low volatility world, the fact that monetary accommodation is now being (slowly) withdrawn – with ECB expected to join shortly – means that there is finally some prospect for a “regime change” in financial markets. After all, the bubble merchants have generally been raising rates at the onset of recessions in the past.

Of course, it would require a change in regime that overwhelms the central banks’ ability to unload a few thousand VIX contracts at “just the right time” and a vast number of HFTs and algos which are doing very nicely in the current BTFD environment.

Meanwhile, talking of mean reversions, there is another factor which makes the current timing slightly more attractive than it has been (ever actually).

This Is How Tyranny Rises And Freedom Falls: The Experiment In Freedom Is Failing

Authored by John Whitehead via The Rutherford Institute,

It is easy to be distracted right now by the circus politics that have dominated the news headlines for the past year, but don’t be distracted.

Don’t be fooled, not even a little.

We’re being subjected to the oldest con game in the books, the magician’s sleight of hand that keeps you focused on the shell game in front of you while your wallet is being picked clean by ruffians in your midst.

This is how tyranny rises and freedom falls.

What characterizes American government today is not so much dysfunctional politics as it is ruthlessly contrived governance carried out behind the entertaining, distracting and disingenuous curtain of political theater. And what political theater it is, diabolically Shakespearean at times, full of sound and fury, yet in the end, signifying nothing.

We are being ruled by a government of scoundrels, spies, thugs, thieves, gangsters, ruffians, rapists, extortionists, bounty hunters, battle-ready warriors and cold-blooded killers who communicate using a language of force and oppression.

The U.S. government now poses the greatest threat to our freedoms.

More than terrorism, more than domestic extremism, more than gun violence and organized crime, even more than the perceived threat posed by any single politician, the U.S. government remains a greater menace to the life, liberty and property of its citizens than any of the so-called dangers from which the government claims to protect us.

This has been true of virtually every occupant of the White House in recent years.

Unfortunately, nothing has changed for the better since Donald Trump ascended to the Oval Office.

Indeed, Trump may be the smartest move yet by the powers-that-be to keep the citizenry divided and at each other’s throats, because as long as we’re busy fighting each other, we’ll never manage to present a unified front against tyranny in any form.

The facts speak for themselves.

We’re being robbed blind by a government of thieves. Americans no longer have any real protection against government agents empowered to seize private property at will. For instance, police agencies under the guise of asset forfeiture laws are taking Americans’ personal property based on little more than a suspicion of criminal activity and keeping it for their own profit and gain.

We’re being taken advantage of by a government of scoundrels, idiots and cowards. When you’ve got government representatives who spend a large chunk of their work hours fundraising, being feted by lobbyists, shuffling through a lucrative revolving door between public service and lobbying, and making themselves available to anyone with enough money to secure access to a congressional office, you’re in the clutches of a corrupt oligarchy.

We’re being locked up by a government of greedy jailers. We have become a carceral state, spending three times more on our prisons than on our schools and imprisoning close to a quarter of the world’s prisoners, despite the fact that crime is at an all-time low and the U.S. makes up only 5% of the world’s population. The rise of overcriminalization and profit-driven private prisons provides even greater incentives for locking up American citizens for such non-violent “crimes” as having an overgrown lawn

We’re being spied on by a government of Peeping Toms. The government is watching everything you do, reading everything you write, listening to everything you say, and monitoring everything you spend. Omnipresent surveillance is paving the way for government programs that profile citizens, document their behavior and attempt to predict what they might do in the future, whether it’s what they might buy, what politician they might support, or what kinds of crimes they might commit.

We’re being ravaged by a government of ruffians, rapists and killers. It’s not just the police shootings of unarmed citizens that are worrisome. It’s the SWAT team raids gone wrongmore than 80,000 annually—that are leaving innocent citizens wounded, children terrorized and family pets killed. It’s the roadside strip searches—in some cases, cavity searches of men and women alike carried out in full view of the public—in pursuit of drugs that are never found. It’s the potentially lethal—and unwarranted—use of so-called “nonlethal” weapons such as tasers on children for engaging in little more than childish behavior.

We’re being forced to surrender our freedoms—and those of our children—to a government of extortionists, money launderers and professional pirates. Under the guise of fighting its wars on terror, drugs and now domestic extremism, the government has spent billions in taxpayer dollars on endless wars that have not ended terrorism but merely sown the seeds of blowback, surveillance programs that have caught few terrorists while subjecting all Americans to a surveillance society, and militarized police that have done little to decrease crime while turning communities into warzones.

We’re being held at gunpoint by a government of soldiers: a standing army. As if it weren’t enough that the American military empire stretches around the globe (and continues to leech much-needed resources from the American economy), the U.S. government is creating its own standing army of militarized police and teams of weaponized bureaucrats. These civilian employees are being armed to the hilt with guns, ammunition and military-style equipment; trained in military tactics; and authorized to lock the nation down under martial law.

Whatever else it may be—a danger, a menace, a threat—the U.S. government is certainly no friend to freedom.

As I make clear in my book Battlefield America: The War on the American People, you cannot have a republican form of government – nor a democratic one, for that matter – when the government views itself as superior to the citizenry, when it no longer operates for the benefit of the people, when the people are no longer able to peacefully reform their government, when government officials cease to act like public servants, when elected officials no longer represent the will of the people, when the government routinely violates the rights of the people and perpetrates more violence against the citizenry than the criminal class, when government spending is unaccountable and unaccounted for, when the judiciary act as courts of order rather than justice, and when the government is no longer bound by the laws of the Constitution.

We won’t be able to sustain this fiction much longer.

“Things fall apart,” wrote W.B. Yeats in his dark, forbidding poem “The Second Coming.”


“The centre cannot hold; Mere anarchy is loosed upon the world… Surely some revelation is at hand.”

Wake up, America, and break free of your chains.

Something wicked this way comes.

What Goldbugs Have Been Waiting For: Goldman’s New Primer On Gold

The good news is that Goldman believes “precious metals remain a relevant asset class in modern portfolios, despite their lack of yield” and disagrees with Ben Bernanke and the naysayers “They are neither a historic accident or a relic. Indeed, by looking at each of the physical properties of an ideal long-term store of value…we can clearly see why precious metals were initially adopted and why they remain relevant today.”

It was sounding really good – and there was 91 pages to go – although when it came to the drivers of precious metal prices, Goldman did not exactly re-invent the wheel “We see two key drivers of the precious metals markets: Fear and Wealth”

That said, there was a new take on what, in Goldman’s eyes constitutes fear as “in our new framework we see a closer link to growth expectations. However, we ?nd that many risk factors are relevant, depending on the sub-component of gold demand: real interest rates, debasement risks, sovereign balance sheet risks, geopolitical risks and other market tail-risks. Stated more simply, we are talking about the drivers of “risk-on”/”risk-off” behavior in markets.”

On the wealth angle, the good news for gold was that “as economies grow, they tend to go through a rapid gold accumulation phase at around per capita GDP of $20,000-$30,000, following a ‘hump-shaped’ relationship between per capita income and gold demand. As more EM economies (including China) are set to grow to these income levels over the next few decades.” 

As in-depth students of gold market research, our mood was lifted by some genuinely original research. Goldman found that the ratio between gold purchases and household savings (global we assume) has been broadly stable at around 1.7% for almost 40 years. Who knew that.

Goldman approximates the gold supply available for households to purchase as new mine supply plus net central bank sales. It goes on to use some simple maths “we can view the equilibrium 1 .7% share of savings allocated to gold (?*) through the following relationship, where the equilibrium real gold price is p*, the amount of household savings is Y , and the supply of gold available to households (de?ned as mine supply plus central bank net sales) is S.”

Solving the equation for the real price of gold suggests that gold is positively correlated with savings and negatively correlated with the value of mine supply and net central bank selling. Yet again, it’s not a surprise, but we were surprised by the closeness of the fit with the real price of gold since 1980 (left hand chart).

Goldman’s analysts tweak the model to improve the fit from fear variables, principally “risk-off” periods when there are portfolio reallocations from equities to gold “We see large and persistent deviations from the long-run equilibrium allocation to gold, driven by ‘risk-on’/’risk-off’ episodes. While the forces driving risk sentiment can shift over time, they are nearly always highly cyclical in nature. Growth expectations and the business cycle are therefore key variables, being negatively correlated to gold demand.”

We are pleased – in the current environment of central bank bubbles – that the establishment’s favourite investment bank emphasised gold’s role as a hedge to systemic tail risk, which is precisely what got most of us interested in gold more than a decade ago. To wit “Gold tends to preserve its real purchasing power over the very long run (albeit with substantial short-term deviations). Since Roman times, the real value of gold has remained more or less unchanged in the face of wars and political, social and technological shocks. Many investors therefore see gold as a way to hedge against structural tail risks, which could potentially erase the real value of all other ?nancial assets…Throughout history, governments have run de?cits and built large levels of debt. Having accumulated a large stock of debt, governments must either pursue austerity, ?nd a way to boost growth, or engineer in?ation (‘print money’) to erode the real value of their debt. Historically, governments often chose money expansion over austerity. Gold has traditionally been in competition with government paper currencies. When there is loss of credibility in the central bank/government’s ability to meet their liability of maintaining the real purchasing power of their currency, gold demand tends to go up. Normally, this happens when the government does a large monetary expansion, which the public fears could lead to currency debasement.”

The report goes on to compare gold and cryptos, asking if cryptocurrencies are the “new gold” and concluding “We think not, gold wins out over cryptocurrencies in a majority of the key characteristics of money.” Briefly, Goldman argues that gold is not subject to competition from alternatives (ignoring silver and cryptos, of course), holding its purchasing power (although cryptos are untested) and much lower daily volatility. It finds that cryptos (on the basis of Bitcoin) are vulnerable to hacking, regulatory risk, network and infrastructure risk, while being superior in terms of portability and divisibility.

The Goldman report touches on one critical feature of the gold market, but only barely, noting that “Investors have become more conscious of the physical vs. futures market distinction in the post-2008 crisis period. As such, the fear drivers have likely tilted demand more in favor of physical gold (or physically-backed ETFs) as a hedge against black-swan events vs. using futures.”

We apologise if we are getting a bit “picky” (not for “serious Goldbugs” perhaps), but Goldman doesn’t address the fact that the global gold market, including the LBMA (over 95% of the trading in unallocated “paper gold”), is a fractional reserve system, in which the ratio of paper to physical was estimated by the Reserve Bank of India at 92:1.

We would also have liked to see the discussion of issues such as

  1. Repeating daily trading patterns which seem to be driven by computer algorithms.
  2. The near-lock step movement of the gold price and the Yen since the Fed and the BoJ expanded QE in late-2012.
  3. Frequent intra-day waterfall declines in the gold price where large volumes of futures contracts are “dumped”, without any attempt to maximise the selling price.
  4. The role of the Bank for International Settlements in the gold market and opaque central bank lending policies of physical metal.
  5. The volume of LGD bars in London vaults (excluding official holdings and known physically-backed ETFs) which is the “float” backing the massive LBMA trade.

These omissions tainted a generally positive view of a report in which Goldman turned surprisingly bullish on gold.

CIA Urges Trump To Delay Release Of 3,000 Never-Before-Seen Documents On JFK Assassination

Authored by Alex Christoforou via,

More than 3,000 never-before-seen documents from the FBI, CIA, and Justice Department on the assassination of John F. Kennedy are scheduled be released, with many experts fearing that such a large release of secret JFK assassination documents will spur “a new generation of conspiracy theories.”

According to Roger Stone, the CIA is urging President Donald Trump to delay disclosing some of the files for another 25 years.

Roger Stone said in a post on his website…

“They must reflect badly on the CIA even though virtually everyone involved is long dead.”

Newsmax reports:

More than 3,000 never-before-seen documents from the FBI, CIA, and Justice Department are set to be released, along with 30,000 that have only been partially released in the past. The document dump “will simply fuel a new generation of conspiracy theories,” write Philip Shenon and Larry J. Sabato.


Sabato is the director of the University of Virginia Center for Politics and author of “The Kennedy Half-Century” and Shenon is a former reporter for the New York Times and author of, “A Cruel and Shocking Act: The Secret History of the Kennedy Assassination.”


The CIA is urging President Donald Trump to delay disclosing some of the files for another 25 years according to friend and political adviser Roger Stone but the National Archives would not say whether any agencies have appealed the release of the documents.

According to The Gateway Pundit Roger Stone and Gerald Posner, two New York Times bestselling authors who are polar opposites about who killed JFK, have joined together to urge Donald Trump to release all the remaining classified files on Kennedy’s assassination.

About 3,100 files are still sealed in the National Archives. Under the 1992 JFK Records Act, the Archives have until October 26 to decide which of those files to publicly disclose.


Some of the classified documents include a CIA personality study of Oswald, top-secret testimony of former CIA officers to congressional committees, transcripts of interrogations with Soviet defector and Oswald handler Yuri Nosenko, letters about the case from J. Edgar Hoover and Jackie Kennedy, the CIA file on Jack Wasserman, the attorney for New Orleans mob boss Carlos Marcello, and the operational file of E. Howard Hunt, career spy and Watergate burglar.


Roger Stone, in his bestselling 2013 The Man Who Killed Kennedy: The Case Against LBJ, set forth the case that LBJ was the mastermind of plot that included the CIA, the Mob and Big Texas Oil to kill Kennedy.


Gerald Posner, in his 1993 bestselling finalist for the Pulitzer for History, Case Closed: Lee Harvey Oswald and the Assassination of JFK, concluded that the Warren Commission conclusions are correct and Oswald acting alone had killed Kennedy.


While they might not agree on who killed Kennedy, Stone and Posner are longstanding advocates for the release of all the government files on the assassination.


“These files should have been released long ago,” says Posner. “The government does this all the time, over classified documents and then holds on to them for decades under the guise of ‘national security.’ All the secrecy just feeds people’s suspicions that the government has something to hide and adds fuel to conspiracy theories.” Posner is convinced the case will still be closed when the last document is made public.


”I know CIA Director Pompeo is urging the President to delay release of these records for another 25 years,” said Stone. “They must reflect badly on the CIA even though virtually everyone involved is long dead.” Stone believes the evidence supporting the case in his book is still hidden somewhere in government files.


Both authors called on President Trump – who is empowered to make the final decision should the National Archives or CIA balk on releasing all the files – to opt for transparency.

Amazon Strikes Deal With Landlords To Install Lockers In Apartment Buildings

Since the dawn of the e-commerce era, the largest US landlords have loudly complained about the crush of packages flooding mailrooms at apartment properties across the country.

One apartment owner went so far as to stop accepting packages altogether, while others have experimented with increasingly novel ways to process residents’ mail.

Now, Amazon is stepping in with a solution to a problem that it’s largely responsible for creating. WSJ is reporting that the e-commerce giant is partnering with some of the country’s largest landlords to install electronic lockers where delivery people can leave packages for residents, sparing building staff the tedious work of receiving, recording and distributing packages to residents – work that one landowner said was costing it $3.3 million a year in lost wages.

Amazon has signed contracts with apartment owners and managers representing more than 850,000 units across the U.S. to begin installing Amazon locker systems in their buildings, according to the landlords. Amazon has commitments to install the lockers in thousands of properties, many before the peak holiday shopping season, according to a person familiar with the matter.


Several of the nation’s largest operators, AvalonBay Communities Inc., Equity Residential, Greystar and Bozzuto Group, have signed up so far, company executives said.

Most of the Amazon’s partners plan to offer the lockers as free amenities for residents. They’re able to do this because the lockers will ultimately save building owners money. Amazon is charging a one-time fee of between $10,000 and $20,000 for the lockers.

Amazon is taking over the package rooms of some of the country’s largest apartment landlords, in a move that could help consolidate its control over how goods make it from the warehouse floor to the front door.

Amazon’s move, if successful, is likely to shift how the biggest apartment operators deal with packages toward a fully automated system that residents will be able to access 24 hours a day.


The locker program, dubbed Amazon Hub, will accept packages from all carriers and not just for purchases made on Amazon. They will be open only to residents, not the wider community. Residents will receive a notification when they have a package and a code allowing them to open one of the slots.


Apartment owners pay about $10,000 to $20,000 to purchase the lockers initially and don’t pay a monthly fee. Most landlords said they don’t plan to charge residents but to offer it as an amenity. They could also make back some of that cost in savings on staff labor.

While Amazon still harbors dreams of supplanting UPS and FedEx with a fleet of package-delivering drones, Amazon Hub represents the company’s attempt to solve one of the most vexing problems associated with e-commerce: The so-called ‘last mile’ – moving the package from a distribution hub to the customer’s doorstep.

The more stops a driver needs to make, the more expensive deliveries become. By allowing a driver to leave many packages in one place, Amazon can substantially reduce the cost of deliveries.

The most expensive leg of any delivery is the so-called last mile: getting a package to the doorstep. Amazon already has added lockers throughout the U.S., including announcing it is rolling them out at its newly acquired Whole Foods stores.


For Amazon—or any package carrier—it is all about density. The more places a driver has to stop and drop of a package, the more expensive the process. It also increases the likelihood of a stolen order if it is dropped off unsupervised.


So dropping off a load of packages in one spot, like a locker or apartment office, is a huge cost saver. And as apartment managers grow increasingly frustrated with more deliveries to take care of, lockers become more attractive.

While several of the world’s largest landowners have already started the process of installing Amazon Hub at their properties, there are still some problems that Amazon hasn’t accounted for, according to WSJ.

For example, building staff will still need to find alternative accommodations for large packages that don’t fit in lockers. Also, as e-commerce becomes increasingly popular, individual apartments may require larger lockers.

Amazon has designed lockers that can be placed both indoors and outdoors, which should make it easier for landlords to add more storage capacity, if needed. 

One issue for landlords has been that it is challenging to update lockers as demand grows and technology changes. Amazon will make lockers that can be placed both indoors and outdoors, making it easier for landlords to add lockers if the volume of packages that residents order exceeds the space they have in their mailrooms. The lockers will also have cellular connectivity so apartment owners don’t have to worry about running an Ethernet cable to them outdoors.


One problem Amazon hasn’t solved: oversize packages. Ms. Hollinger said Avalon has had to contend with deliveries including furniture to outfit an entire two-bedroom apartment, kayaks and even hub caps. No locker system can reasonably solve that problem.


“The package lockers are quite helpful, but the volume will be hard to sustain in the long term,” she said.

AvalonBay Communities, Greystar and Bozzuto Group – three of the largest apartment rental companies in the US – have signed up for Amazon Hub, and Bozzuto Group has already started the installation process. Amazon says it’s already planning to install lockers for 850,000 apartments. The company is in talks with other landlords, and expects to substantially expand the program next year.