Back in June, one of Wall Street’s more philosophical derivatives strategists, DB’s Aleksandar Kocic looked at the state of the market and postulated that far from “stable” the existing risk “equilibrium” is one which can be described as “metastable“, the result of widespread complacency, and which he compared to an avalanche where “a totally innocuous event can trigger a cataclysmic event (e.g. a skier’s scream, or simply continued snowfall until the snow cover is so massive that its own weight triggers an avalanche.” Putting it in his usual post-modernist style, Kocic said that “complacency encourages bad behavior and penalizing dissent – there is a negative carry for not joining the crowd, which further reinforces bad behavior.”
Kocic framed the current state of the market as follows:
