(This is not investment advice. It’s only provided as a mental exposure to complexity in the financial markets.) A lot of market participants have been obsessing over “unsual” volatility in the first quarter of 2018. Of course, volatility is the wrong metric to follow, especially after the ETN volapocalypse earlier this year. And no, there wasn’t any huge shift in market sentiment or political risk. All that is pure rationalization – and you should know better unless you are an entry-level Wall Street analyst who’s spent the last three nights in the office. There had been no macro-level surprises and, if you are about to mention Q1 earnings jitters, that’s probably not a sense of humor most would appreciate. What’s been going on then? Well, it’s all quite embarrassingly straightforward. But before we take off the wrapper, a quick inventory of the piñata of real market events that broke in 2018Q1: LIBOR embarked on a steep and “puzzling” (not at all) climb. The Fed continued on its preannounced and “pre-digested” (it wasn’t) path of rate hikes and balance-sheet contraction. Retail shocked (not really) by withdrawing from equity ETFs. Gold (mostly unsecured IOUs) finally broke out of its channel and made solid, if unimpressive, gains. US Treasury auctions were underwhelming (unless you were paying attention) relative to recent experience of yields & oversubscription. Hedge funds continued to get clobbered despite the “favorable” environment (OK, OK, this is not entirely news yet, but it will be). The USD was beaten down and stayed there because tweets (actually, nothing to do with them). Confusing? Not if you consider the possibility that all of these are in fact the same event. To make that notion manifest, all you need is a very basic understanding of global macro, monetary cycles and market structure. Getting Real … Continue reading CANCEL ALL ORDERS !!! CANCEL ALL ORDERS !!! Your Crash Course on Credit-Driven Reversals