MacroVoices interview with Real Vision Television co-founder Raoul Pal
Key excerpts in attached article:
- compares the VIX contango trade to the portfolio insurance problem that was blamed for the 1987 crash
- they don't realize the rate of change of the VIX can be so extraordinary that the losses can mount up massively and super quickly
- record level of speculative long positions in the oil markets compares to the conditions in the summer of 2014 prior to the bear market decline
- The other thing was speculative position in crude oil was all time high in fact if I took the trend going back from the early 80's it was seven standard deviations above that trend and well over three standard deviations maybe four standard deviations from the trend in the last 20 years or 15 years.
- I've seen a similar situation with copper driven by China and a few other things where copper position is wildly extreme and so I start to think well too much reflation is priced into these things maybe there’s an interesting opportunity on the short side
- What is interesting oil volatility has been coming lower. Look, I don't think it's going to get back to where it was in 2014 when it was trading below 20 but it has come down from a peak of 80, a kind of a real trading range of 50 down to 30. If it comes any lower the ability to buy options start to make sense because oil volatility can go to 80 can go to a 100