Shorting? I Triple Dog Dare You

The idea of shorting the markets these days reminds me of the iconic scene in A Christmas Story where Flick is triple-dog-dared into touching his tongue to a frozen flagpole. It sticks of course.

And, while not quite as painfuul as shooting your eye out with a Red Ryder carbine action two-hundred shot range model air rifle, it reinforced the notion that adages exist for a reason: to protect us from disaster.

Be careful what you ask for. Look before you leap. Beware the ides of March. They all pale in comparison to “don’t fight the tape.” It’s an old expression that originates from the days of the ticker tape. Put simply, it means you shouldn’t fight the prevailing trend.

These days, we might rephrase it “don’t fight the Fed.” Sure, Neel Kashkari insists it’s not the Fed’s job to protect investors against losses. Yet, given that maintaining extremely accommodative monetary policy does exactly that, it’s a rather disingenuous claim.

One of the easiest ways to witness this protection in action is to watch VIX and its influence on the algos that guide the markets these days. VIX is once again on a precipice — off over 36% from its recent highs and clinging to the bottom of a channel that could easily break down if need be. But, let’s not overlook the fact that two of the spectacular plunges over the past six weeks have been followed by even more spectacular spikes. Could a third be right around the corner? Or, is taking a long position in VIX inviting disaster?