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The selloffs, lately, in both bonds and equities have occurred NOT when a wave of
broad selling it, but rather when the buyers failed to materialize. To get a lot
of moves like what you describe you would to see:
1. Selling waves on the decline
2. Higher sustained implied volatility.
We continue to be in an environment where actual volatility still exceeds implied
volatility ... this is clearly a fat tails condition which could very easily
result in what you describe. In fact a fat tails distribution describes a market
poised for big moves either way. The only experience we have with fat tails
markets is the current environment and this continues to be driven by the economic
growth and overall demographics.
By the way it also describes a marketplace where options overall are cheap and the
bias should be toward buying premium.
Proffittak@xxxxxxx wrote:
> In a message dated 1/11/00 9:31:05 PM Eastern Standard Time,
> OnWingsOfEagles@xxxxxxxxxxxxx writes:
>
> << Seems to me these sharp narrow "small time" 10%-20% "corrections" would get
> more prevalent, as opposed to any sustained bear market - since the system
> gets too expensive for anything more to happen, and the world leans on the
> wrong side too much, and we over-correct in the opposite direction, swiftly.
>
> Opinions, Doctor?
>
> Gitanshu
> >>
> Good Morning
> when i was managing billions for a major insurance CO in 1987 i was
> Very tense and worried about redemption of thousands of clients the day
> after the crash
> However to my surprise most people are too busy with their life and only
> got hi volume of calls when the got their 10/31/87 statements
> the redemption was VERY small. as the customer service people were
> telling
> customers that they have to stay the course for the LONG hole
> happy trading
> Ben
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