Deutsche: The Market Broke In 2012, "This Is What Everyone Is Talking About"

Two weeks after Deutsche Bank’s whimsical, James Joycean derivatives strategist, Aleksandar Kocic disaggregated the market’s current sweeping complacency regime in a florid stream-of-consciousness report, and warning that the market's current "metastability" would lead to "cataclysmic events", with a crash becomes increasingly more likely the longer price discovery in the market (one not propped up by Federal Reserve) is delayed, in his latest note from this week he takes on a more practical - if just as abstract - target; quantifying complacency, both in a market sense and as a metaphysical concept (long-term readers of Kocic are all too aware that when it comes to fusing markets and philosophy, mostly of the post-modernist bent, nobody even comes close).

Deutsche: The Market Broke In 2012, "This Is What Everyone Is Talking About" Kocic%20comp%203_0

Deutsche: The Market Broke In 2012, "This Is What Everyone Is Talking About" Kocic%20comp%203_0

While we offer readers a TL/DR, Cliff Notes recap at the end of this post for those with little patience for parallels between existentialist, information overload and the decay of the VXX, we urge following Kocic’ narrative, if for no other reason than to comprehend to what abstract levels of market intellectualization the current phase of market “breakage” - courtesy of central banks of course – has prompted such otherwise dry commentary as cross-asset derivative analysis.

We start with Kocic’s definition of “complacency”, which the DB explains “carries a negative connotation -- there is something narcissistic about it. It implies unhealthy inward-looking perspective: One imagines of being in a better position than he really is, missing an opportunity to improve. When used in the market context complacency implies a state of comfort that is out of sync with perceived levels of risk. It is almost always identified with shortsightedness, a mistake associated with overlooking the long-term consequences. In the same way a boxer who drops his guard runs a risk of being knocked out, complacent markets are facing a potentially painful encounter with reality.”

Deutsche: The Market Broke In 2012, "This Is What Everyone Is Talking About" Kocic%20comp%204_0

Deutsche: The Market Broke In 2012, "This Is What Everyone Is Talking About" Kocic%20comp%204_0

With this brief detour into the fusion of trading and philosophy out of the way, Kocic then proceeds to do something nobody else has done before: quantify market complacency.

To do that, Kocic notes that at first one has to define the frame of reference of complacency. “Relative to what” should complacency – a conditional category that both reflects the absence of risk aversion and also is synonymous with taking on an unhealthy amount of risk – be quantified?

http://www.zerohedge.com/news/2017-07-02/deutsche-market-broke-2012

Deutsche: The Market Broke In 2012, "This Is What Everyone Is Talking About"

Deutsche: The Market Broke In 2012, "This Is What Everyone Is Talking About"

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