50% of my non-cash trading positions are SPY puts. That ratio was significantly lower last week; some of that is due to impressive price increases in put options in the last couple days. If I were to talk my book, DOOM!

In reality, I’ve accumulated most of those puts by buying variations of straddles and strangles, then selling the calls when it allowed me to get my money back and leave the puts (I prefer to play with the house’s money). I would have been roughly 4x as profitable if the market had its correction three months ago (I had XLF and QQQQ puts then. I was ready. Everything expired worthless). I anticipated the volatility, and this correction is long overdue.

I also think the decline in January marked a turning point in this bear market rally. From that point, it seemed like we were due to run out of gas without warning. For technical reasons I’m willing to accept that this last week was a better fit for the title of “turning point.” Most bear market rallies end rather violently. I’m willing to bet that this time isn’t different in that respect. I’m just unsure when it will really end.

I think we are eventually going to test last March’s lows. I really couldn’t say if this correction is the one that will bring us there or not. I could easily see us taking a bit of a zig-zag course with a downward bias before a crash, followed by a bit more chaotic movement near the ultimate bottom. To talk my book again, at market close tomorrow, I plan on rotating out of some of my June puts, and opening up a straddle or strangle for September. I’ve also thought of opening up a September put and a July call. I think that describes my pessimism in fairly quantifiable terms. If there is some action that causes the market to move up, I expect it to be short lived.

That’s my market doom outlook. I’m not sure how to describe pessimism on anything else. In my opinion China’s bubble has already started to pop. Housing prices are down 10-15%, but sales are down 50%. They’ve got a bit of useless infrastructure spending to finish up before facing real civil unrest problems. That could wait three years. Is that pessimistic?

Greece is going to default, and any attempts to defer that will only add to the final costs. Will it happen now or in 18 months? I could provide the scenarios for various time lines, but I couldn’t provide odds on which I think is most likely (I think it’s mostly a political decision). Is that pessimistic?

Canada’s housing market is going to start imploding any day now. Is that pessimistic?

If I think you are too gloomy, it’s probably because I disagree with you on timing. However, since you’ve not discussed much of the impacts in terms of their timing, I couldn’t really say with certainty.

And thank you for the diversion, my pot pie was delicious.