Stocks, Bonds & Commodities All Sell Off

Nowhere to hide this week as all of the above are getting sold relentlessly. The selling in stocks all over the world continues and has now finally hit the states. Uptrend lines are broken across the board. Bonds continue to get smoked as 10-yr yields are back to levels not seen since 2011. And metals keep getting destroyed as they lead the commodities sell-off.

So where is this money going? Not the yen like I had guessed they would. Nope – the good old US Dollar is the only bright spot around the globe. Check out this monster since Uncle Ben started his moonwalk on Wednesday:

6-20-13 dx

There aren’t many places to hide in these intermarkets. They haven’t bought the Yen and Treasury bonds like they did during the 2008 crash. They’re only buying US Dollars.

It will be interesting to see who among the 3 bounces first, and how long that bounce lasts. My guess is they buy bonds before the other two, but that’s just my educated guess, we don’t have a position on. We’re continuing to stay as market neutral as possible. Low/zero correlation pairs are still what’s working best for us. If it ain’t broke don’t fix it right? So we’re going to stick with that theme for now. I like this Long Discretionary / Short Staples spread ($XLY $XLP) as it closes at multi-year highs. As long as these fresh highs hold, it seems like they want to take them higher. I was impressed today seeing the relative strength in this particular pair in the face of a global meltdown.

6-20-13 xly xlp

So overall I think this market selling off is a good thing. I’m happy to see it. Too many people have been making too much money far too easily. Reminds me a lot of the conversations that I would have with $AAPL shareholders before last September. The lazy shareholders that never sold and didn’t use stops got destroyed. And it may sound like I’m being mean, but they deserved every penny the lost. Same goes with market participants who aren’t disciplined these days in taking losses when their wrong. The gold bugs are a great recent example of that. And we’ll have more of these examples in the future, I can promise you that…

Discipline. I think that’s what important. It’s not always easy, but it’s necessary.