The Year of Living Dangerously - With the Covid-19 Virus.

But just look at this very, very silly chart. The problem with going long the VIX Futures - is that they are hard-core contango - with the "spot" volatility in around 16 to 17 and change (as of April 12, 2021), the May 2021 future is priced in the 20's. So, you buy the future for $20,000 and change (probably closer to $21,000 for one contract), and watch as it decays down to $16,700 by mid-May. Ugh. Not a great trade. The whole issue around "trading volatility" is - ah - you can't. It's sort of an illusion. Sure - everyone uses options - but then you have a whole hornets-nest of "Greeks" attacking the value of your position. Time-decay, 2nd-derivative volatility-decay, etc. It really is like trading the wind. :)

You look at this silly chart - and you really want to somehow go long - but no idiot is gonna take the otherside of your "Long the VIX" trade, unless - maybe 75% or more of the time - he is going to hoover up all the cash. The whole idea of the thing is maybe a tad questionable? (My inner trader says: "Don't worry - there are idiots always. Nature produces them like raindrops. Just make sure they are your counterparties. Your job, is not to be a Mr. Stupid and become one of them. " ... :)

How to Avoid Blowing Yourself Up - and Other Observations.

A Bad Trade. Note the glyphic use of "laurel leaves" - crown that Roman General's who achieved victory in war, were allowed to wear. The laurel leaf wrapper suggests power, strength and success. So it is used to *wrap* the idea-glyph. But like any *wrapper* - it is often a psychological mechanism for explicit mis-direction. If you do anything and have to make any choice decisions that are important - you are trading. And the trades you will be offered, will be motivated by the self-interest of your counter-party. And hard-core deception will often be present. Not always, but one must be alert to the risk of errors-of-thinking, especially in your OWN thinking, for that is where the greatest errors originate.

[Note: Here, I will let my *inner trader* speak in a clear (foul language) voice.  Maybe even NSFW, is this section.  Truth matters.   Trading and speculation seems to be in my blood and DNA, not sure why.   I might even post pictures that are NSFW here.  You have been warned.  Exit this section, if easily offended.  ]

[April 9, 2021 ]  I've made detailed studies of how and why guys (it's always guys)  blow up as traders.   From Jessie Livermore, to the Meriwether's LTCM, to Soro's Victor Niederhoffer, Barings Bank's Nick Leeson, and Société Générale trader, Jérôme Kerviel.  And so many others - such as the details of the South Seas Company (the great English "Bubble") and what eventually happened to the company (a great little essay by Charles Lamb in his "Essays of Elia" - the first little story in the 1905 edition is: "The South-Sea House". 

Does anyone remember "IOS" (Investor's OverSeas Services) or Dome Petroleum?  Or how about Nortel Networks or Royal Trust or Laidlaw Transportation or even General Fucking Motors? (Their secret Detroit motto:  Buy our cars, we fuck you.  Buy our stock, and we work with the Government - to *REALLY FUCK YOU*!)    Or how about Lehman Fucking Brothers?  Remember them?  :)

If you were long and concentrated in any of that shit (True Confessions:  My Dad had IOS stock, I used to try to short Nortel (since I knew it was a money-losing shitshow run by idiot fuckwits, and enabled by corrupt government toadies - but I could never hold the trades - always got bid up on me, and I had to bag out) - but any of it - if you owned it big - you blew up and got carried out.  

I met two old folks at a Starbucks who had some fuckwit broker put all there money in Nortel - and then hold the position until it went asymptotic to the zero line.   It's fascinating - this pattern just repeats and repeats and repeats.  (I had thousands of GM shares.  Once I was down 50%, I sold most of it.  That hurt.)  I did a really stupid dumb-assed thing once - and lost half my money.  I had to turn on automatic, pre-programmed behaviour to pick up the phone, and close the position at a monster loss  (my 50% rule.  You lose half  - and you are automatically out.) I remember the broker trying to talk me out of selling the shit that eventually went to zero.  I remember walking up Yonge Street, feeling numb and in a trance.  But by the next day - the City and I were still there, and I decided I just had to be more careful in the future.   There are bad companies, crooked schemes and  - and - there are the dumb guys (like me, when I was young and stupid) that hold and invest in this goop and sludge and muck - and get crushed. 

It is like learning to fly airplanes - but without an instructor.  You prang a few air-craft.  It gets a little expensive.  But some sort of worm-of-desire keeps you on track, wanting to learn more about both the process, and your own self.

But then, there are also the good and honourable fellows - who just take on TOO MUCH RISK - and a magnified minor burpfart in the price series completely destroys them.  This is different.  They *MUST* know better.   (They must, right?)

So, the Bill Hwang story has caught my attention - and I have been researching it.  It might be the biggest, fastest vapourization of one guy's private wealth - in all of history.  I think the fellow was a good and honourable man - and also a fair-dealing fellow.   His story will be (or at least should be ) taught in schools.   I honestly hope he comes back.  He did nothing illegal - and his actions did not hurt the market.  He was just heavily (heavily - like FIVE times - margined (retail traders are only allowed to be 1/2 times margined - ie. if you have 1 million dollars of stock - you can borrow 500,000 dollars - not 5 million dollars.)).   But if you are 5 times margined, and you have to market-to-market your swap contracts-for-difference every night - then a 20% price delta WILL PUT THE FUCK OUT OF BUSINESS BY REMOVING ALL YOUR WEALTH.  Jesus Christ - I want to scream - this guy MUST HAVE KNOWN THIS.  He was - is - most probably not a stupid person.  He did this on plan, my super cynical inner-trader whispers to me.  He wanted this outcome.

I think - sub-conciously - this guy WANTED to self-destruct in this manner.  He wanted to show how GODDAMN GOOD he was to the whole world.  I don't think he would even admit this to himself...  But I think it is the only viable explanation.

Each of us has the possibility of the worms-of-madness being inside our thinking process.  Every single person does, I am sure.  Neuro-science research and modern Behavioural Finance experiments demostrate this truth - consistantly.  

Like in David Bowie's death-song, "Lazerus".   "Everybody knows me now.  I've got nothing left to hide".   Eventually, secrecy just gets really, really boring and annoying.   We all know Bill Hwang now.   Like that Korean airliner crew:   Captain Sum Ting Wong,  First Officer Wee Tu Lo,  Navigator Ho Lee Fuk, and Flight Engineer Bang Ding Ow.  (This was on CNN, so it must be true, right?)   In Greek Tragedy, the hero has a fatal flaw.  And the Greeks wrote Comedy also.  Comedy and Tragedy are tied together, like co-joined twins.  We need them both.

Oh, and remember Enron?  Fastow and Enron?  Jeffery Fucking Skilling?  It just keeps coming and coming and never ends.  It is how we are wired, it seems.   You have to laugh - Bang Ding Ow indeed.  (The airport fire crew, rushing to rescue the people from the crash-landed Korean Airliner - drove over a young girl who had simply fainted on the grass.   What can you say?) 

Bill - I have to tell you this - honestly, trader-to-trader, and as someone who respects Asian culture deeply - God is an asshole, if he exists.   You *cannot* and must not rely on that stupid prick - because he does not exist.  God is an artificial mental construct.  He exists only in the imagination of humans.  We are on our own, in a maelstrom of Chaos.  That's why risk management is so important.  You need that, to keep your charitable programs like LINK, running.  We are the only gods there will be.  Without us - goodness just disappears completely.  Humans create and define what is good.  Honestly - there is nothing else there.  That is why moral action is so important.   Bill Hwang  - I hope you can come back.  Don't die yet.  You still have work to do.  Put the Bibles in the dumpster.  Read better, more accurate history books.  And have better risk-control, eh?