Watch out for the Black Swans
|January 27th, 2011||
|Contributed by: The Mad Hedge Fund Trader|
|It is not my intention to ruin your day. But I may well do that if you read this piece. While traders pile on their longs with reckless abandon, and retail flows into equity mutual funds turn positive for the first time in two years, I am hearing a rising tide of negativity from the jungle telegraph. There are “black swans” circling out there everywhere, and the risk is that they alight upon us in great unexpected flocks, like a scene out of Alfred Hitchcock’s classic film, The Birds.|
Let me give you a list of things that can go wrong this year:
*The ten year Treasury bond spikes to 5% and money gets expensive.
*Crude soars to $120 a barrel and gasoline rises to $4 a gallon.
*Europe blows up again, sending the dollar through the roof.
*Seeing stock prices soar, Ben Bernanke ends QE2 early, paring it down to QE 1 ½.
*The high frequency traders and quants hungry for a mean reversion smell blood in the water and trigger another “flash crash.”
*Retails investors conclude they were right to stay away and bail on what they have remaining.
Of course, this is just one of many possible scenarios that could play out this year. As for me, I’m booking my chalet in Zermatt in the Swiss Alps now to beat out the rest of you.
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