There it was, right there on the screen. You had to see it to believe it. They did it! They did it! They pulled it off. No one had ever done THAT before.

At halftime, the score sits at 10-6, the Indianapolis Colts leading the New Orleans Saints. In the locker room, someone with all the guts he needed to make something awesome happen told his idea to someone else and they agreed, and the plan was spun. It was the oldest trick in the book in action. You know, the infamous “tapping on a person’s left shoulder, when you’re standing on their right.” Who made that call? Who made that call? Who said, “We should kick the ball to ourselves”?

Playbook in hand, special teams took the field, and the New Orleans Saints did what no team had ever done. They kicked the ball to themselves at the START of the half. No one does that. Onside kicks are used when a team is under extreme duress—when there is almost no time left and it is your only choice. And since it is obviously your only option, the other team knows to line up their defense in anticipation of it.

But not that day. Not during Superbowl XLIV. They New Orleans Saints did an onside kick before they HAD to, so no one expected it, and that is why it worked! The oldest trick in the book. The surprise was beautiful. No team had ever done that before during The Super Bowl because no team ever had the guts to take that risk—until now! Now sports history is forever changed because the storybook, fairytale, underestimated, Kim-Kardashian-datin’ New Orleans Saints took that risk and it worked. They did an onside kick to start the second half and it worked. IT WORKED!!!!!!

Whatever happened after that didn’t matter because when you take that kind of risk—BELIEVING it can happen—then the universe conspires to help you achieve it. The ending was written when the risk paid off. No one ever gets there the same way, and the saints did it their way: with a gutsy, brilliant surprise.

I love this game. From here on out it will never be the same. And perhaps, after this lesson in mettle, neither will I.

Now that’s entertainment.

And the beat goes on.

The Saints Nailed It

Complex as it isn’t, my bankroll is positioned all over the world and the only one who really understands it is me. In reference to the public markets of late, we are approaching an important juncture. A turn is at hand. Given my data points, I need determine the best allocation of my capital to the assets that will gain in value most rapidly–I need appreciation and velocity.

Libertarian

In order to execute my trading model, I must stay true to it. In doing so, It is essential that I have no obligation to other people’s money (OPM). Since I am not paid by anyone to manage their money, my emotions are not tied to the performance of any monies but my own.

With sole trading discretion, I can take whatever risks I choose. As my model is not hindered by diversification, I can allocate all my capital to one thing, and I can go all in whenever I want. Nobody else has a say. With no limited partners, I am able to exercise my beliefs in Objectivism. I am held down by no management. My decision are derived like those of a machine: a robot with a heart.

Tony and I

Don’t ask the question—I already know what it is. It is sitting on the tip of your tongue, and you want it to hang in the sky so you can watch my reaction. But I’m not even going to let you ask. I am going to explain before you can claim your smug satisfaction.

“What about back in September when you wrote about running money for Tony Stark? What’s that all about? In some circles it is rumored that you are a money manager to superheroes and now up above you are claiming that you are not running OPM.”

Indeed, I do communicate with Tony as to how to allocate some of his assets. However, I am not paid a dime to manage anyone’s money—just my own—and I must keep it that way. Because I must stay true to my model.

What Does the Model Say Now?

Keep in mind that the trading model is not one of profit regularity and predictability. My model is one of relatively inconsistent bouts of extreme capital expansion. The dime bets that go to $50—tail events. Yeah, I’m that guy.

It is still my opinion that the largest opportunity in the years ahead will be trading gold. Gold is going to make an extremely rare and large move higher, and when it happens, it is going to happen very quickly. I have seen this movie before. Monetary policy has grown out of control on a global scale and gold is the ultimate risk aversion trade.

In my post the other day, I spoke of some tells that lead me to believe that there is a large move brewing in the markets. The situation remains the same. In fact, Dubai risk has widened even more.

The Currency Market

From my view of the money flows in the currency markets, I am seeing the carry trade moving away from the US Dollar and into the Japanese Yen. The Yen is the new carry trade.

Yes, the dollar has strengthened of late (chart below), but the recent strength in the mighty US Dollar is more related to carry traders re-arranging. Sovereign swaps on the US have widened enough to signal that the dollar will grow weaker as opposed to stronger in the not so distant future.

All Roads Lead to Rome—Again and Again

So here is the triangulation: there is a large move brewing in the market and the move is connected to a sovereign related event. Therefore, we should look to buy the asset that will appreciate most during a time of governmental stress.

During the crash of 2008, the best asset to own was the US Dollar. The dollar was the risk aversion trade. However, during the crash of 2010, the US dollar will not be the risk aversion trade. Let me explain. The stress on the horizon is sovereign related, but the demand we have seen in the US dollar lately is temporary. The asset, therefore, to own is going to be the ultimate safety trade, the one to which we always return: gold. (Silver will tag along.)

There is a large dislocation set up, and it is the opinion of Vincent M. Vega, editor-in-chief of Volatility News dot com, that the asset class to appreciate the most and with the most velocity is gold. Like the the Jackie O. trade of the 1970’s, it is time again. The gold trade is on. Be a part of it. History is in the making. Will I see you there?

And the beat goes on.

The Dollar Strength Will Fade

Meanwhile, back at The Factory, the expansion continues and my mission is in motion. Extensive time travels have my clock out of whack. Life is so strange — Destination Unknown.

Conditions

S&P 500 - Weekly

Since the March 2009 bottom, we have seen an uptrend with little interruption. In light of some regression analysis, it is evident that we could go either way. This could be a time to buy the index, or it could be a time to sell it. Like a man on a high wire, falling down and being out of the game is not an option. But I must make it back to one side. Will it be the buy side or the sell side? In correlation, here are some data points that I ponder:

1) Dubai Credit default swaps have continued to trade wider, at levels not seen since November.

2) The Volatility Index (VIX) made a large move higher last week.

3) Volatility dispersion is at it’s highest level in months–indicating higher probability of a systemic problem and trouble with the entire structure of the market and it’s underpinnings. If the market is a sell, it will be best to short the market indexes as opposed to individual names.

4) Some individual names look as though they can move much, much higher from here. My re-positioning will depend on various factors that I will continue to monitor.

I am a trader
and Flexibility is
my reality.

And the beat goes on.