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Pick a metric that you like. P/E, EV/EBITDA, whatever. I don't know why you're talking about 10% rates. > In any case, irrespective of where the market was wh

Pick a metric that you like. P/E, EV/EBITDA, whatever. I don't know why you're talking about 10% rates. > In any case, irrespective of where the market was when the virus hit, it would have gone lower This mentality totally equates bad occurrences with disastrous occurrences, and is useless for trading volatility or understanding tail risk. The magnitude of a drop in asset prices is a function of POSITIONING. Think of it as the acceleration rate of the undesirability of a stock. If everyone is long the stock, a negative catalyst will hurt the stock faster and with more magnitude. The pandemic is the fire, but POSITIONING is the crowdedness of the theater.

JumpCrisscross 7y ago
> bad occurrences with disastrous occurrences, and is useless for trading volatility or understanding tail risk As someone who actually traded volatility for a living, this statement makes no sense. Tail risk is almost always exogenously driven and endogenously compounded. > If everyone is long the stock, a negative catalyst will hurt the stock faster and with more magnitude What does “everyone is long the stock” mean? Short interest is low? Valuations are bullish? (With the latter determination depending on rates. 20x earnings is bearish if rates at 10% and bullish if they’re 1%.) Prices can always go down. Revenues, and cash flows, can always go down. If people are staying home and supply chains breaking down, revenues and cash flows will go down, regardless of where they started from. How that fundamental change translates into asset prices may vary with leverage and interest rates and potentially short interest. But the driver, revenue shock, is constant, as is its effect.