Today we are getting some more fear headlines out of the usual places:
The entire commodity complex was on fire earlier in the morning, but ended trading down, along with a rise in volatility.
In particular, gold got a huge bid, but ended up down for the day:
The lesson here is that the nanosecond before a crisis materializes, the only safe asset is cash. It’s not gold or Bitcoin. I don’t know if this is a correct metric or not, but one possible indicator of cash demand is the (TSX: HSAV) ETF. It is trading so much higher than NAV – rationally it doesn’t make a hell of a lot of sense.
Today’s trading action was fairly pronounced in that the commodity complex companies that have been trending from bottom-left to upper-right charts over the past month have been exhibiting whip-saw trading action. It’s as if you have a bunch of hedge fund managers taking a look at their trading screens on Friday morning and deciding this is a good time to take some chips off the table, all in unison – which seems to be the easy trade. Easy trades are most typically not correct.
There are a bunch of other firms on my watchlists, some of which have gone down sharply, that are catching my attention. Not close to buying them, but just paying more attention than I was a couple days ago. When I see synchronized price action (most of it on the downside) like today, it makes me wonder what will happen if we truly had a liquidity crisis in the markets. VIX has perked up a few percent from the previous couple weeks and if those headlines above come to fruition, coupled with other stress in the markets, might create a fertile environment for some tactical capital allocation.