There are approaches to be taken, traction to be gained even as equity, FI and FX prices fluctuate in violent fashion. This can be done by those who have a grounded view of fundamental developments just ahead. The most cerebral approach, our view, is to be free on encumbrance, ready to strike after value is inserted by the maddened crowd, and then ready to get away in the fashion of the male black widow.
For example, Monday morning’s massive quality flight put debt prices far out of range of what we considered fair value. This distortion presented opportunity to those who were ready to pounce, as we explained Tuesday. And the best way to do that is spreading relative activity, vigor, one sovereign to another, or, within a credit.
So the lesson is that in times of violence, unless one is an insider, then remain at the sidelines, set to exploit exaggerated price change, raptor style.
Never, on pain of death, join the crowd; wait for them to deliver the gift.
Robert Craven
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