My Slow-Motion Slow Down thesis — a gradually slowing economy that sees GDP eventually slip to 0, and eventually takes a major toll on the stock market — is almost mild compared with NYU’s Nouriel Roubini. His economic thesis is for a full blown recession in the US come mid-2007, along with a major slow down in China (but not a recession).
You can see the full video here:
Hat tip: GB!
>
Roubini: The Biggest Bear on Wall Street
Simon Constable
The Street.com, 10/17/2006 2:37 PM EDT
http://www.thestreet.com/video/strategysession/10315539.html
Why are we listening to this guy? He has cost me about $30K in losses (worthless expired puts) over the last 4 months. It’s great that he sees a slowdown coming, but the market sure doesn’t and that is really all that matters to a trader. Economists can forecast that a recession will be here, but if the market doesn’t forecast it, you lose money trading on the info.
Barry, you run a nice blog, but man are your predictions WAY off. I mean, being smart and being right don’t always go hand-in-hand.
~~~
BR:
Jeff, Who on earth told you to puts? Not me — and please don’t place your bad trading decisions on anyone else but yourself —
Its especially annoying to someone who A) flipped Bullish on June 13th, and made good money form that call; 2) has REPEATEDLY stated that its way too early to short; iii) I rec’d IBM as a BUY yesterday, pre-earnings. Its up 4 beans today.
I don’t know who’s more frustrating, the cheerleaders who spin every last data point as positive regardless, or the people who refuse to
take responsibility for their own errors.
Barry: I assume you mean GDP growth slowing to zero. Otherwise, you are indeed biggest bear of them all.
Who was the guy on bubblevision a few minutes ago suggesting we are entering the third and probably most powerful leg of the bull market that began in ’82?
That’s right, blame your mis-timed puts call on Roubini. Think for yourself.
if you listen to the video to the end, you’ll learn that Roubini is bullish on equities through the end of the year. So your losses should be blamed on who???
I don’t even consider Roubini that bearish.
With a spread of about 35 bps between the 10 year and the 3 month, it seems like the probability of a recession is greater than a softlanding.
JDamon, next time try a leveraged inverse fund. You won’t lose everything. He didn’t cost you; your poor money management skills did. You bet it all, you get burned.
JDamon, here’s my advice to you: Sell most everything you own, pay off all debts, buy physical gold and silver, have 6 months cash on hand for emergencies, move to a rural small town to live with and take care of your mother, plant a garden and stock up on necessities and food supply for at least a year. Take my advice. It’s free and guaranteed. You won’t lose a nickle.
Questions for you, are you going to take my advice or not? If not, why? Did you make the decision on your own, or did someone coerce you? What are your goals in life? Are they your goals, or someone else’s?
A man makes his own decisions and takes responsibility for his actions. Are you a man JDamon, or a victim?
s: sounds like Harry S Dent, but I have no idea. Didn’t catch it.
just a note, US economists are more often wrong when predicting the economy in China than in US. I am always puzzeled by those economists who are not shy to comment on everything about every different economy. If a person doesn’t know the boundary of his knowledge, it is hard to take him seriously.
Roubini has as good a chance of being right as any economist. Yet, hasn’t he been calling for the end of world since 2004? A few money managers have used him as a whipping boy because he has been perpetually wrong from what I’ve read. Now, that said, he may be right….just early.
A man makes his own decisions and takes responsibility for his actions. Are you a man JDamon, or a victim?
or perhaps a Bush republican? …you know, when he f*cks things up it’s always everybody else and their grandmother’s fault. Sorry, couldn’t resist.
I never go short. Never. It’s more than enough for me to go all cash and bonds and wait for dips in stocks. It’s very safe play and works good for me.
I expect some correction in the next 3-4 weeks and then I’ll be long till January, in line with Rubini predictions.
I have quite a lot of cash ready in my hands.
Beautiful Roubini.
Beautiful Riholtz.
Nice site!
The thing about predictions is nobody knows anything for sure. What ever happened to smart asset allocation and then be done with it?
>>>The thing about predictions is nobody knows anything for sure. What ever happened to smart asset allocation and then be done with it?<<< You must have missed Dilbert's Unified Theory of Everything Financial. 70% stocks, 30% bonds. Don't touch. Voila.
It sounds like very few here have actually read Roubini’s blog :
http://www.rgemonitor.com/blog/roubini/
Regarding making trading decisions to an economist’s call, there’s that adage of ‘Do you want to be right or do you want to make money’ meaning that you can be right on the direction of the overall economic environment but lose your shirt at the same time.
Which is also the reason why Barry hasn’t gone short yet :
http://bigpicture.typepad.com/comments/2006/09/when_would_you_.html
Jeff, Who on earth told you to buy puts? Not me — and please don’t place your bad trading decisions on anyone else but yourself —
Its especially annoying to someone who A) flipped Bullish on June 13th, and made good money from that call; 2) has REPEATEDLY stated that its way too early to short; iii) I rec’d IBM as a BUY yesterday, pre-earnings. Its up 4 beans today. (How’d ya do with that call?)
I don’t know who’s more frustrating, the cheerleaders who spin every last data point as positive regardless, or the people who refuse to take responsibility for their own errors.
p.s. Its a good blog, but I ain’t that smart . . .
hello from germany,
here is a real beauty. make sure you see this from ticker sense
ETF Overbought Oversold
http://tickersense.typepad.com/.shared/image.html?/photos/uncategorized/obos1018_1.jpg
i call it “not really oversold…..” :-)
really wounderful work from birinyi
Barry, you are being intellectually dishonest regarding your statement that you “flipped bullish on June 13.” This is what you actually said:
None of these indicators are a magic bullet by themselves, but together they imply we are at a point where the downside is somewhat limited and the upside – at least for a few weeks – is potentially rewarding.
–snip–
Our longer term view remains unchanged
This does not change our longer-term view that the highs for this cyclical bull market were likely made on May 11th, and that the economy in the United States will slow appreciably as the year progresses. We put the possibility of a recession beginning late 2006 or early 2007 as slightly better than even money.
Several times a year, we make a short term “opportunistic trade.” It is for more aggressive portfolios, who can implement a trading plan, using stop losses. Note that short term taxes take a big bite, and depending upon your tax bracket, it may be preferable to do these trades in the tax advantaged accounts.
i would say this guy is right on. deflationary eras usually end in crashes that wipe out debt. if that doesn’t happen, then hyperinflation will get you.
http://www.safehaven.com/article-6113.htm
Here is some more on the coming banking crisis…
http://globaleconomicanalysis.blogspot.com
As for shorting, even if you did get the timing right, I would be worrying about the options market being open for when you redeem your winning ticket.
Marc Pado? The link doesn’t seem to point to Roubini anymore… Random question: Is Roubini’s analysis worth signing up for?
Roubini- all I can say to him is “hubris.” Sure he’s a prof at a top school but a majority of the academics wouldn’t be able to time the market if their life depended on it.
Watching that Street.com video was such a waste. That Roubini moron so proudly says “I predicted” as if he wants a role in Nostradamus movie.
Sure there are negative forces in play right now, but GDP going to 0? Predict so at your own peril. Corporate America & Consumers are not going to stop producing & consuming, respectively, & come at a standstill.
Barry your calls have been spot on, sure every now and then you get them wrong, but who doesn’t? Keep up your work.
Reywal — I’m wrong all the time, but I am not sure which part of “Tradable Low” you find Bearish. But here’s the money quote:
“The way to enter these positions is to scale into purchases over the next several sessions. We don’t want to try to pick the very bottom, and instead would rather balance the risk of being wrong with the reward of a timely entry.
Traders can make buys of indexes in 3 parts: 1/3 today, 1/3 tomorrow, 1/3 Thursday. The indices I like the best here are the larger cap stocks where defensive money may flow. The Dow (DIA), the S&P 500 (SPY), the Nasdaq 100 (QQQQ).”
The Upside targets were DIA 114 (from 106ish), Nasdaq 100 QQQQ 40.50 (from 36.50) and S&P500 SPY at 130 (from 123.50-125)
And to put it into context, that came after a 4 week 8% drop in the SPX, and a 15% drop in the Nasdaq.
If you don’t call that flipping bullish for a trade, than I don’t know how else to make yo happy.
Barry,
I saw you go bullish for a trade on Kudlow, so no worries, sir.
>>>Marc Pado? The link doesn’t seem to point to Roubini anymore… Random question: Is Roubini’s analysis worth signing up for?<<< Don't click on the video, the link is old. Click where it says
full video here.
I’d say that sounds like a pretty reasonable and clearly articulated call to buy. And, you made money. So, what’s the beef with Barry’s call? That he was right short term and that the megacaps marched to new highs so no one has faith that his long term thesis is still valid? Those people are on an emotional yo-yo, don’t understand markets, typically lose money because they are concerned about missing the party, and are usually fodder for the smart money because they don’t understand patience and risk management.
Some of this is frustrating because many retail investors wait with baited breath to have the exact top picked by the pros for a measley $40 bucks a month. It’s about setting proper expectations in advance. No one can tell you exactly when 50 million market participants are all going to decide a particular day is a top. In five years, if he was right, you will thank him for missing the last 5-10% on a top that might have cost you 4-5x or more on the downside. Maybe a b**w*ob would suffice. If he was wrong, don’t pay any attention to his work any more. This “in the moment” daily frantic paranoid “your work didn’t call for us to go up another 5%” gibberish about picking an exact top and being exactly right is ridiculous.
Barry,
As far as I’m concerned, you’ve done a great service for most traders who can think for themselves. Pointing out the macro problems, yet providing real trading advice now and then.
Some people don’t realize that in pointing out macro economic problems it takes quarters upon quarters to unfold. And now that our economies are more global than ever, you are talking about a massive titanic of a turn. It ain’t gonna happen overnight folks. But when it does, it ain’t gonna be easy to turn _that_ back around either.
From what I can see, you’re taking so much heat now because the indices are currently at max disparity from your price targets. And some people don’t understand this macro call, and they hear you talk about poor govt data and the housing problem, and they expect it all to come tumbling down if not tomorrow then next week for sure.
It takes too much effort to acknowledge these people, and you give so much effort here already.
Kudos to you, Barry.
Barry,
Don’t get me wrong, I love your blog. But I remember that you said in September that May 10th high will likely not be surpassed. I also remember you consistently said that by year end, SPY would go down a lot. Plus, you were very bearish on big cap tech names such as MSFT, and CSCO.
You were right quite a few times, and I agree with you that people should not blame others for their own decisions. I just hope that you don’t give people impression that you are often right than wrong when it comes to predicting economy or stock market.
I think your blog provides valid arguments, good data, and intelligent opinions. People still have to decide whether they agree with your predictions or not, which may or may not be validated by stock market at all.
yc32 said:
” I also remember you consistently said that by year end, SPY would go down a lot.”
Ain’t over til the year’s over. BR may be wrong — but you have to at least let the year end before you start zinging him on this one.
hubris for roubini, that sounds about right.
hubrini
Are we getting into semantics — “Will not be likely”
A personal story:
I’ve been trading for a LONG time. And, after the 4th longest bull market in history, I flipped bearish for “all the right reasons” last fall.
In the meantime, the model I’ve had the most long term success with is up over 26% since last October. And it’s up from investing in oil, housing and emerging markets – all no nos from a valuation/cycle perspective.
I based my decision to call in my bets based on the fact that six years ago it took me nearly two years to get back to my high water mark, even though I only got down about 20% from peak to trough (excluding a brief two week boneheaded move that I recovered from just as quickly). As such, I thought, I’ve made a good run, why risk it?
For the last three years, the best places to be have been EM, Oil and Real Estate. In fact, Real Estate helped me out back in 2000 as I was scaling out of tech stocks. For real estate, once again,to be leading the pack perplexes me as much as any investment puzzle I’ve encountered, especially considering that the sector is up nearly 5% this month.
If you lose 30 large on expired puts, god bless you for having that kind of bankroll to blow in the first place. But unless Barry’s executing those trades for you that’s your medicine to take.
I’ve despaired this much several times in my career – all occurred at major inflection points, going both long and short. As someone who’s missed a large part of this most recent rally, the despair level and the angst from my clients is similar to the situation in 1999 and early 2K.
Ultimately, this is an odds game. If I had never seen a roulette wheel land on 25 six times in a row, I wouldn’t have thought it possible. But if you had placed your money on 25 six times in a row without foreknowledge, would that have made it a good bet? Same thing with this market.
I’ll be interested to see how some of these Barry-bashing comments look in six months.
Roubini’s theory is that the housing led slump will be at the end of the “slowdown” phase and by Q1 2007 will produce a signifigent slowdown of consumer spending as the housing busts reaches such a point, that equity is completely dried up, causing signifigent contraction of the economy and financials such as the stock market bust big time the same half.
Roubini has been bearish, but untill June I think, he wasn’t really making any real recession predictions. Since then, he has been gunhoe.
If what he predicts doesn’t happen in Q1 2007, his call was wrong, I don’t buy that “latest Q2 2007” bs, that is a copout.
Another problem with Roubini’s analysis is thinking nominal growth will go down orderly. Q3 looks like the weakest quarter in years. 2000 provided that example as nominal GDP slightly contracted in Q3 before a Q4 nominal bounce. The way things are going, it appears that may happen again. Then comes Q1 2007…….
Barry–What did you think about roubini’s comments?
Everyonw else–If there is a better money blog than Big Picture out there i’d sure as hell like to know what it is…..
My original purpose was not to bash Barry at all. I think he really knows his stuff. I do think the blog tends to be a bit one sided in its analysis, but since it is Barry’s blog, so be it. I still love reading it.
BTW, to clarify, I lost the $30k, but before that I doubled my money ($18K) on some puts bought on May 11th (if you can believe that). I am also 75% long the market (25% cash), so overall the rally has allowed my overall portfolio to grow. I needed some tax losses this year anyway :-).
Byno-
Thanks for your comments. I’ve been mostly in cash for this one also. Can’t believe my eyes some days.
Bynocerus,
The regret of missing a gain when others are gaining… is always greater than the regret of losing when others are losing. Losing is to be lamented; missing a gain is to be despised.
Failed pessimism is almost always blamed, but failed optimism is almost always forgiven. Consequently, being optimistic is the lesser risk for any person of influence.
Let me illustrate:
Would you play Russian Roulette (once) with a 6-shooter for $100?… I bet not and I certainly wouldn’t.
What about for $1 million?… I hope you wouldn’t and I wouldn’t either, but some would.
Change the odds to 1 bullet:10 chambers… Now, would you for a mil?
Change the odds again to 1:50… what about now? We’d get lots of takers. I might think about it for a long time, but I don’t think I’d be stupid enough, even then.
Keep 1:50 but change the amount to $1 billion… now would you?
What if you were age-60, and your entire financial future depended on not risking your money in the stock market… would you still risk it if there were a 1:10 chance of experiencing a P/E of 12 or under within 5 years?
I hope you see what is happening… but I can assure you than even starting as low as far less than $1 million, many more people would refuse your advice not to play and they would play anyway, even soon-to-be retirees, even with just a metaphorical 6-shooter… and I further assure you that those you counciled with and recommended that they not play because of the risks; were they to play anyway, and win, they will come and chide you for your advice.
Just a few stats. The DJIA managed about a 5% new high in Jan of 73. That would put the current market at about 12300. The COT report for the last few weeks for commercial traders has shown a tremendous build in S&P short positions larger than all but a few weeks during the 2000-2003 bear market. This bull has lasted longer than all but 5 bulls in the last 110 years. 2 of those came at the end of massive bubbles 1929 & 2000. The other 3 began at the bottom of secular bear markets with valuations extremely depressed 33-37, 82-87 & 42-46. If I remember correctly this bull started at P/E’s around 25-30. I believe that’s higher than any other bull market topped out at. I may be wrong on that one but it certainly didn’t start with single digit P/E’s like all other secular bull markets. On top of all that we still haven’t had the 4 year cycle low yet. So all in all I don’t think I want to be on the other side of the trade against the biggest, most capitalised and smartest traders in the world. As for buying puts I would prefer to scale in gradually as the market gets more and more overbought and I certainly wouldn’t limit myself to 4 months.
This market is extremely overbought and as far as I can tell there has never been a time where an overbought market didn’t correct (take a look at gold, natural gas or housing stocks this year) So I think I can predict with near certainty that this too will end. Greed is a funny beast that demands that caution be thrown to the winds and drives us to follow the herd.
per Gary:
“I may be wrong on that one but it certainly didn’t start with single digit P/E’s like all other secular bull markets.”
By coincidence, I happened to have run across a 100 Year Dow/PE Chart today that pretty much agrees with what you are saying. It hasn’t been updated since April 2004, but is interesting anyway. If nothing else, it depicts bear markets as mostly sideways affairs for the Dow with the exception of 1929 which I suppose is why everybody runs there when things get rugged.
per Bynocerus:
“Ultimately, this is an odds game. If I had never seen a roulette wheel land on 25 six times in a row, I wouldn’t have thought it possible. But if you had placed your money on 25 six times in a row without foreknowledge, would that have made it a good bet? Same thing with this market.”
yup, I’ve seen that too only it was 17 and I hit it twice. :)
But odds are odds and calculating them as best you can is about all you have to go on. I’ve been running monte carlo trials against a straddle I’m considering and arbitrarily decided on 2,000,000 cases. The percentages of breaking even in one way or another seemed to have settled after about 10,000, but lo and behold, one of them changed after 1,600,000. Should I let it go to 10,000,000? I don’t know, there is probably some quant guy here who could say what the optimum theoretical limit should be, but I also understand that just because the exercise may tell me that I have an 84% chance of at least breaking even before expiry, that doesn’t mean I will. Nor does it mean that I would if I went thru buying the same straddle ten times in a row over ten quarters with exactly the same gaming outcomes.
By the same token, Roubini may be on sound ground in having set the odds of recession at 70%, but that leaves a pretty wide margin for error. As far as Barry goes, my recollection is that he tried to catch a bottom in QQQQ twice in May/June before actually catching it, so I considered him a hopeless optimist. :) But at any rate, actually pulling the trigger takes one finger of one hand, your hand, and if it doesn’t work out as hoped/planned/expected then no whinng.
But I’d have to say that I don’t understanding letting $30k in puts expire worthless- I’d have pulled the plug on that adventure at around $20k even if I had a big roll.
I think that 100-year chart demonstrates something very well… It’s not the eventual even extended periods of market price consolidation and corresponding P/E c-o-m-p-r-e-s-s-i-o-n that gets you…
….it’s when during one of those periods, when the rate of P/E compression happens to greatly exceed the rate of earnings growth, the resulting market price level is destined to fall significantly.
One of those periods of excessive P/E compression happens on a pretty regular basis. It’s demonstrated by the alternating red and blue notations of P/E range. Probably the reason for that is that they tend to be almost g-e-n-e-r-a-t-i-o-n-a-l.
The average investor today can not conceive of a 9-12 P/E, let alone a 6 or 7. It’s because their investor-life experiences have taught them to ignore the possibility of P/Es that low.
Now, I don’t know Roubini and certainly can’t speak for him, but I have a real sense of the depths of his caution. It’s because he probably has a sense of two things that might occur simultaneously; first, a continuing and possibly accelerating tendency toward P/E compression (a generational and possibly demographic phenomenon that is beyond the capacity of pundits to rationalize away, Roubini or anyone else) combined with; secondly, a severe enough recession to also contract earnings (an event that d-o-e-s lend itself to rational debate, a pretty good one that’s carried on here and elsewhere daily).
I’ll be damned if I know which way the economy is going to swing right now. A good case can be made for several outcomes… some good and some bad.
If, and it’s a big if, both those things were to occur at the same time… we’d probably see a P/E between 6 and 12 on the S&P at some time during the period.
Pick some number for an estimated S&P earnings average over the next 5 years. I don’t care… I won’t argue the amount (remember, they call me Eclectic)… but let’s just say it averaged $100 during that time. Putting a 6-12 P/E on those earnings would show us an S&P 500 ranging from 600 – 1200.
I wouldn’t sweat the 1200 too badly, but the 600 would be a real bitch slap. Another real problem is that a decline in P/E ratio from 23-21, say, or even 19-17 is one thing… It’s a whole ‘nother thang to see a 12 go to a 9 or incrementally from 9 to 8 to 7, because those changes represent huge percentages.
Suppose we dropped to 12 any time soon (bitch slap #1). Thinking that 12 was the bottom would be rudely rewarded if P/Es then dropped to 9, another 25% (bitch slap #2).
Were it to happen much sooner, and with a much lower earnings figure, then, well… you can freely fill in the math yourself.
Were it to happen later than 5 years from now, and after sufficient earnings improvement to greatly exceed the $100 average figure I used arbitrarily, then we might be only so unlucky as to experience the P/E compression w-i-t-h-o-u-t a corresponding radical reduction in price level.
Pray that we don’t have anything worse than the latter.
per Eclectic”
“One of those periods of excessive P/E compression happens on a pretty regular basis. It’s demonstrated by the alternating red and blue notations of P/E range. Probably the reason for that is that they tend to be almost g-e-n-e-r-a-t-i-o-n-a-l.
The average investor today can not conceive of a 9-12 P/E, let alone a 6 or 7. It’s because their investor-life experiences have taught them to ignore the possibility of P/Es that low.”
Gadzooks! I think that you are onto something with this theory that one generation fails to pass the warning on down to another. I am old enough to have been quite confident by 1975 that I’d never see another Vietnam in my lifetime, and yet….
I work at a tech company and was somewhat amused in 2001 to watch 30 year old managers who had never known anything but up, up, up struggle with whom to cut (obviously I was not cut and was not going to melt down even if I was or I wouldn’t have found it quite so amusing). They had no idea of what they were doing or that being a manager could also mean being a spineless prick. They also apparently didn’t understand that they would get cut in droves six months later, but that’s another life lesson in itself I suppose.
Anyway, I like the generational idea, thanks for seeing what I didn’t notice.
per my good self:
“The percentages of breaking even in one way or another seemed to have settled after about 10,000, but lo and behold, one of them changed after 1,600,000. Should I let it go to 10,000,000?”
hmm, maybe not a bad idea, the numbers have started to drift after 6,000,000 trials, not much, but some. I’ll just let it run overnight and see what happens I suppose.
Roubini has been correct so far. We are in a slowdown. His prediction is recession by 1Q 2007 or possibly Q2. He stated that the “suckers” rally is typical and would most likely extend toward the end of the year. He has yet to miss. As far as the current rally, even many bullish are insecure about it. Not really much in the way of fundamentals backing it up.
As John Hussman says, over bought – overvalued – and overbullish. He would however remove a smallish part of his defensive hedge if the “market internals” improved.
He predicted Q3 GDP at 1.5 pct and Q4 less than 1. It’s hard to say what the gmen will report and revise. Lot’s of weird ( and incorrect) data being reported by the gmen.
Never heard Barry suggest shorting – just the opposite. He has said a number of times – I am not shorting this market – but have some long positions.
The intellectually stimulating posts by you folks is the main reason I read this blog. This group has been the best yet. Thanks!!
BTW, to clarify, I lost the $30k, but before that I doubled my money ($18K) on some puts bought on May 11th (if you can believe that). I am also 75% long the market (25% cash), so overall the rally has allowed my overall portfolio to grow. I needed some tax losses this year anyway :-).
Based on the numbers you posted, you need to learn about money management. If you doubled $18k, you only had $36k. If you lost $30k on expiring puts, that means you bought near-term options worth 83% of your total account value. With money-management like that, you deserve huge losses.
I thought I was making an excessively large bet when I put 10% of my account into puts expiring in 8 months. They’ve lost half their value already, but my short-term call hedging has made up for a bit more than half of that – which still leaves me with about a 2% loss. If the market moves by 15% (up or down) between now and March, I will make money on the whole deal.
With the way options work, you can double your money on a large move with only putting 10-20% at risk. Why would you ever want to put 83% of your money into near-term options? That’s the sort of leverage that Amaranth used to blow itself up in a week.
I thought I might call attention to the fact that the S&P and DJIA are now rising in a parabolic arc. If you take a look at a 3-4 year weekly chart you’ll see that the RSI is now at a level that has turned back every advance except the end of 03. The begining of bull markets always have the most powerful rises so it makes sense that 03 would see a strong increase. It doesn’t however make sense that after 4 years we should be getting a parabolic advance. “At the top of bull markets it seems everyone in the world is long” from Trader Vic II. I would say that describes the current state of the market pretty well. If you don’t believe me just tune in to Cramer. Now take a look at a 4 year chart of gold to see what the outcome of parabolic rises are. The difference is that gold is in a secular bull market and stocks are in a secular bear market. Of course we all know that markets can stay irrational for quite a while. I have my doubts as to whether this unsustainable advance can continue past Jan. though.
Or, you know, you could’ve gone with Barry’s recommendation of MII, and been up 3% since he posted it.
I’m not saying, I’m just saying.
I’m the biggest bear of them all. I see catastrophic results around the corner from the combination of a cosmic credit bubble and a derivatives juggernaut created over the last couple of decades – but trading based on an economist’s advice? You jest.