We're all short vol

I meant to publish this entry before I went on holiday, but time got the better of me. My initial impression of markets and the economy as I get back in the saddle is that I haven’t missed much. As such, after hitting F5 an awful lot of times to pull my spreadsheets into the present, I am left thinking about the same themes that I have since Covid-19 ripped up the script. Actually, I am pondering the same themes that I was mulling before the virus too. 
Economists and analysts are running out of ways to describe the current regime, but in a nutshell, the state of play is as follows. The virus was the straw that broke the camel’s back, prompting policymakers to double-down on the fascinating experiment they have been flirting with, in some form or the other, since the onset of the great financial crisis. How much fiat currency can be created before it either destroys capital markets via inflation, or perhaps more likely, sows political disaccord, if not outright kinetic conflict? 
I am neatly leaving out the prospect of policy actually getting it right, which is to say; the idea that a new equilibrium is obtained which allows monetary and fiscal policy to seamlessly leave the stage. After all, why would policymakers give up the power that they’re currently being offered by economic events? Luckily the answer to the first part of this question seems to be a very long time, and quite possibly well within the investment horizon for many investors. As a result, investors are being invited to pick up dimes in front of the proverbial steamroller, at gunpoint for added effect. History suggests that they will do just that, until something breaks.

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