Do Stocks Perform Better When Consumption Growth is Booming or in the Doldrums?

Consumption growth matters a great deal in the developed world.  It’s about 2/3rd of US GDP.  So you would think there would be a pretty clear linkage between higher consumer growth rates, faster earnings growth and superior stock performance.   Think again.

In fact, it’s quite the opposite.

When you look at periods when annual retail sales growth was in the top decile and bottom decile over the last 10 years, and then measure subsequent stock returns, the bottom decile wins quite handily.  The chart below shows an 18 developed country average since 1960 of stock index returns after annual retail sales growth was in the bottom or top decile over the prior decade.

We have some sample size here too.  Between the 18 countries, there were 570 months when annual retail sales was in the top decile and 856 months when it was in the bottom decile.  To prevent one country dominating, I simply took an equal average across all countries.

What the chart shows is not a subtle difference.  When retail sales growth is in the bottom decile, you make, on average, just short of 25% over the next 2 years.  Buy when its in the top decile, and you make a mere 1.43% over the next 24 months.



I don’t know but there are two probable explanations, both of which may be at play.  Weaker growth leads to lower interest rates which begets borrowing and expansion.  Higher growth leads to higher rates and things slow down.  Markets are also discounting mechanisms and people aren’t real good at imagining a world different than the world they currently inhabit.  So when consumption is weak, people and markets are overly pessimistic.  Similarly, “happy days are here again” consumption is probably the period the market has become overly optimistic in its future pricing.

At present, only one country, France, sits in the top decile of 10 year retail sales growth.  No one, unsurprisingly, is currently in the bottom decile.

What Happens Economically and Financially When The Short-end of the Yield Curve Inverts?

There are multiple ways of measuring the yield curve, but for the purposes of this post, we will be focusing on the short-end only, meaning the difference between the 2-year note yield and 3 month T-Bill rate.  In a normal market, interest rates at two years trade above those at 3 months, because there is greater risk in lending for a longer period of time.  Occasionally, however, short rates rise above long rates.  In the US, this inversion has happened 15 times since 1960.  In a fuller global set of developed markets that excludes the US, this inversion has happened 409 times since 1960. Yield curve inversion is traditionally seen as a negative, either a sign that banks will refuse to lend at rates below deposit rates, or that monetary policy is too tight.  What we see when we look at the data is that while inversion of the short-end of the yield curve is bad economically across almost all countries, and also bad for US financial markets, the results for financial markets outside the US are actually (and surprisingly) positive.

To measure economic impact, we will look at two simple metrics: industrial production and retail sales growth.  In each chart you will see what has happened in the two years following each yield curve inversion, on average.

The first chart shows what has happened to industrial production both in the US and the rest of the developed world over the last six decades after 3-month rates rise above 2-year yields (having been below the prior month).  In the US, the results are bad for the next two years (with growth only beginning to come out of its decline after 21 months).  We see a pretty similar story outside the United States, though because this is a much larger average of countries and outcomes, the results are more muted.  After a yield curve inversion, most developed countries’ industrial production declines about 1% and remains depressed for about 18 month before beginning to rise again.  There are a few exceptions, notably the English speaking countries.  Australia, Canada, New Zealand, the UK and Singapore show little to no decline in industrial production.

(Data Sources: Federal Reserve, US Census Bureau, as well as other Central Bank, Ministries of Finance & National Statistical Offices for non-US countries)

The next chart shows what happens to retail sales.  Unlike industrial production, which can frequently actually contract, retail sales almost always grow, so to adjust for this, the chart shows how much retail sales are weaker than the long-term growth rate in each country.   Whether it’s in the US or the rest of the developed world, yield curve inversion at the short end of the curve leads to below trend consumer spending.   Only one country is an exception to this: Italy.  Don’t ask, I don’t know why.

With all that horrible economic news a yield curve inversion should be bullish for longer maturity (10+ year) bonds, since there is almost no inflation threat on the horizon.  Turns out that this logic does indeed hold, except in the US.  As you can see in the next chart, in the first 9-10 months after the US yield curve flips, longer bonds actually decline.  By contrast, in the rest of the developed world, inversion is universally positive for bond prices.  After one year, every non-US developed country’s average bond market is higher than when the inversion happened.

Finally, let’s consider the impact on stocks.  Looking at the last chart, one can see that yield curve inversion is pretty terrible for US equities, which decline, on average, about 14%.  By contrast and somewhat surprisingly, most other developed countries actually experience stock appreciation after an inversion, though there is some variation, unlike in bonds.  After one year, Italy, Hong Kong, the Netherlands, Denmark all show lower stock prices, but after 24 months all markets, except the US were higher on average.

To tie up, yield curve inversion at the short end of the curve is almost always followed by economic weakness.  Whether it is a driver or simply coincidental is a question I cannot answer.  What is clear is that economic contraction following an inversion is a pretty universal phenomenon in developed countries.

What the inversion means for financial markets shows a bit more variation.  In the US, the results are bad whether you are in stocks or bonds, though it’s a lot worse in stocks.  Other developed countries universally experience bond rallies, probably as a result of weak economic news.  In general, global developed stocks also rally eventually following an inversion as well, perhaps because their longer term rates are moving lower.  Put another way, the decline in US stocks and bonds following a yield curve inversion at the short end of the term structure appears to make the US the exception to the more universal rule.

What have 1% annual gains in interest rates meant for long bonds?

Last week we looked back through US and several developed countries financial history to see what effect of a 1% annual gain in short term interest rates had upon subsequent equity returns. The results showed that US equities have a fairly negative outlook over the next 4-6 months from an interest rate history perspective. This week we are going to be applying the same test to see the effect on long bond returns. Unfortunately, the news is also bearish for expected long bond returns for the next 4-6 months.

As noted last week, 3-month T-Bills have experienced annual changes of 1% or greater 21 times since 1960, while 2-year notes have seen 28 such increases. The first chart below shows what has happened to US long bond returns (meaning Treasuries of around 20 year maturities) over the next year. Like stocks, negative returns seem to bottom around 4-6 months out, with losses of 1.5% to 2% being highly probable if the past is any guide. Though 1 year later, the pain is over and you are back to flat. Whether US bond investors should expect this bond bounce back to repeat itself this time remains a question mark for me, however. Keep in mind that interest rates and bond yields have been in secular decline since their peak in the early 1980s, and there are a lot of tells of future inflation looming on the horizon at present.

Extending the same analysis more globally to 8 developing major countries, we can see a similar pattern, though with more sample size. Internationally, 3-month T-Bills have shown annual changes of 1% or greater 114 times since 1960, while 2-year notes have experienced 121 increases. Like in the US, the long bond’s maximum losses happen about 5-6 months out, but it’s worth pointing out that the loss is a much more modest 25-50 basis point decline. And also like the US, returns 1 year later are flat and even up.

We will conclude the same way we did last week, by pointing out that while the US and Canada have recently experienced 1% annual increases in short-term rates, the rest of developed world has not. So investing in other developing bond markets outside North America remains a very attractive relative value proposition for the next 4-6 months.

What have 1% annual gains in interest rates meant for equities?

Over the last year, 3-month T-Bills and 2-year Notes have both gone from up about 100 basis points.  In theory, higher interest rates should not be good for stocks.  Higher rates curb economic demand and therefore sales growth and ultimately earnings growth, and simultaneously raise the cost of corporate borrowing which funds earnings.  And when you look both in the US and across a large swathe of developed countries, this relationship holds.  Put another way, the prospects for positive equity returns for the next 1-12 months in the US, if 1 year interest rate changes are your only guide, is negative.

Since 1960, annual changes in 3-month T Bills greater than 1% (with the annual change from the prior month being less than 1%) have occurred 21 times, using month-end data.  One year changes greater than 1% for 2-year notes have happened 28 times over the last six decades.  The first chart shows what equity returns look like, on average, in the next year after this rate increase.  Results over the next year are negative with most of that decline occurring in the first 5 months.  While this does not mean equities can’t go up in the US, it does mean that the statistical odds favor a decline.

When you look at a much larger set of developed countries, the same relationship holds, only the statistical evidence is that much stronger (as you can see in the next chart).  Over the last 6 decades, a +1% annual jump in rates has happened 258 times for 3 M bills, and 208 times for 2 year notes.  As in the US, most of the negative returns occur in the first few months.

If the recent 1% annual jump in US rates is negative for domestic stocks on an absolute basis, the same is not true in the rest of the developing world.  Only Canada, where annual changes in 2 year note recently passed above 1%, has seen rising rates on the same scale as the US. Outside North America no major developed economy is seeing rate hikes this quickly (some are actually declining), so there is a strong case selling North American equity in favor of other developed equity markets over the next few months.

Something to Think About: On Chinese Trade Wars and Inflation

Ignoring the inflationary pressures that come from an immigration policy bent on constricting the supply of domestic labor in an already tight labor market, and the consequences of ballooning public sector spending on higher interest rates, and consider for a moment what trade means to the US economy.   Depending upon the year, imports range from about 13-17% of total US gross domestic product.  We import a lot of stuff from Asia and especially China, because it’s cheaper to make there.

We do this for a reason.  Trade is not a zero sum game, but a win-win for both parties, thanks to the economic concept of specialization.  You can make something, say iphones, better than me. And I, in turn, can make something better and cheaper than you, say soybeans. And we exchange one good for another to live richer lives.

Since July of 2008, imports from Asia have grown 30% and imports from China have grown 56%. Over that same period, US consumer prices have risen a mere 13.2%, which is pretty subdued. One of the contributing factors to keeping US inflation so low has been deflation in Asian import prices.  Since July of 2008, imports from Asia have risen 30%, while prices for these imports have FALLEN 36%. Let’s repeat that.  The value of all imports from Asia is up 30% while the prices of those imports is down 36%.  In other words, as US consumers of imports over the last ten years, we have gotten more and more services and goods and paid less and less for them.  A trade war with China, which represents about 47% of Asian imports, would completely reverse this trend, eroding US purchasing power, especially for goods, and put upward pressure on inflation and therefore interest rates.  So while tariffs on Chinese imports may just be a posturing gesture in the art of a deal, should those tariffs become reality, the economic and financial consequences could be fantastically ugly.

Something Scary in Consumer Credit Growth


With the exception of a few anomalous periods, consumer credit has pretty much always grown (as you can see in the first chart below).  Not shockingly, it actually contracted briefly during the crisis of 2008, as households cut back.


When you look at longer-term growth rates in consumer credit, things look fairly normal.  We are not near historic 5 year growth rate lows of 10%, like we were in the crisis, or even the 20% lows we saw in the early 1990s.  Consumer credit 5 year growth is hanging in there around 30%, which is historically a little on the low side, but not terribly so.

Dig a bit deeper beneath the surface, however, and you do see two interesting recent trends.

First, the government has become a major player in consumer credit markets, especially since the financial crisis when risk averse financial institutions became much stingier.  Below is a chart of the composition of who is lending to consumers by institution type.  Banks have always been, and continue to be, the largest providers of consumer credit.  Historically, they have provided 50-60% of consumer funds, though that has dipped closer to 40% since the mid 90s.  Financial companies and credit unions show some variability through time, with financial companies seeing a 10% decline in their share of the lending market since 2010.  But by far the largest change, and the one most worrying if you are a believer in free markets, is the huge jump in the presence of the government in providing credit:  the government is now close to 30% of the consumer credit market now vs. 5% ten years ago.  This is almost entirely a result a second secular trend in the credit markets—the explosion of student debt.

If you look at a longer-term historic chart that breaks down what types of consumer loans were taken, you don’t get a ton of insight because student loans have only been broken out by the Fed since 2006.

What’s interesting is how credit card debt was fairly non existent in the early 1970s at a mere 5% of consumer debt and ran up to 40% in the late 90% and has since come back down closer to 25%.  Car loans, by contrast, have been pretty steady at 30% of total consumer credit.

It’s only when you look at a breakdown of consumer credit since 2006 (when the student loan data becomes fully available) that the changes in US consumer debt composition become so obvious.  As you can see in grey line in the chart below, student loans have moved from 20% of all consumer credit in 2006 to close to 40% now to become the largest percentage of all consumer credit.

The government’s increasing market share of consumer credit is directly tied to the rapid growth in student loans.


The problem is that, in the long run, the growth rate in student loans is utterly unsustainable.  There is too large a gap between the higher growth rates in student loans and lower growth rates in household incomes.  As we learnt from the last crisis, there is only so long that debt growth can outrun income and asset growth.  If borrowing growth exceeds income growth, debt payments either cannot be made and we get defaults, assets have to be liquidated to fund debt payments (young people out of school however have no assets), or students will have to go to family to fund their debt.  None of this is good for consumption or the growth in earnings of companies are tied to younger consumers.

At some point either student loans growth will have to slow, or these loans will have to be written down.  This may or may not be a “credit bubble” since bubbles typically require some leverable asset that increases in value, but nomenclature aside, at some point there will be reckoning.





Is it Better to Use Smart Beta When Investing Abroad?


A slightly different version of this post, written with Chris Shuba and Joe Mallen of Helios Quantitative appeared here: IRIS

You are a US investor that wants to deploy some of your money overseas.  You think international developed market stocks are attractive relative to US stocks, and you also think the US $ will decline over the period you intend to hold your investment.  Your investment decision is logical to you. But you have choices:  You could a) simply invest in a traditional index like the MSCI EAFE, b) invest in a fund that systematically emphasizes a particular factor like a value fund that only buys cheap overseas stocks, or c) invest in a developed fund that blends several factors together, like the JPMorgan Diversified Return International Equity ETF (JPIN).  What is the best choice?

Investing in a traditional international market capitalization index like the MSCI EAFE is not a bad choice. It has delivered nice returns for a US investor, especially uncorrelated outperformance in the 1970s and 1980s, and helped to diversify a US-only portfolio.

Your second choice is to invest in one particular investing style because it makes sense to you.  You might believe that a fund or index that chooses the cheapest or most attractively valued stocks based on metrics like Price to Earnings (PE) is best.

You could go find a discretionary portfolio manager who only buys stocks he deems to be cheap.  Typically the concept of “cheap” is based on some absolute metric that the manager has in mind, such as never buying a stock with a PE greater than 15.  If there are not enough stocks that are attractive, he will hold his money in cash until he finds the prudent bargains he seeks.  This prudence also obviously risks possible underperformance from being absent from the market.

The alternative is to buy a value index or fund that systematically only buys the cheapest stocks in a particular investment universe.  So if there are 1000 investable stocks available, the index ONLY buys the cheapest decile of 100 stocks and is always fully invested in the 100 securities that are relatively cheapest.  This is an investment approach that a discretionary manger may disdain.  The discretionary value manager may look at those same 100 stocks and think they are pricey.  But nevertheless, academic research has shown that always being fully invested in the relatively cheapest percentiles of stocks in the US has produced superior returns over many decades.

Such a portfolio is called a “factor” portfolio.  Why the name?   In the early 1960s, academics introduced the concept of beta and demonstrated that individual US stocks had sensitivities to, and were driven by, movements in the broad market.  In the early 1990s, academic research began to show that other “factors” such as value and size also drove US stock returns.  Since then, several factors have been identified as driving individual stock outperformance: value, size, volatility, momentum and quality.  Stocks that are cheaper, smaller, less volatile, have more positive annual returns and higher profitability have historically outperformed their peers.  It turns out these factors also work internationally.

Of all the factors, value is the factor that has been the best known the longest (even before it was academically identified as a “factor”), thanks to the books of Warren Buffet’s teacher Ben Graham.   And if you look abroad at an array of developed global markets and create a value index and compare it to its simple market capitalization weighted brother, the historic outperformance of value has been stunning.  Until recently.

While there was some variability by country, on average from the mid-1970s up until 2005 a value factor portfolio in a developed market outperformed its market cap weighted index by about 2% a year.  That’s a lot. By contrast, since 2005, the average developed country value portfolio has underperformed a market cap indexes by about -40 basis points.  Which is the danger of investing in one factor.  It may not always work at every point in time.

So if investing in one factor like value runs the risk of underperforming, how about a multi-factor international developed equity portfolio?

Below is a breakdown of individual factor portfolios’ performance in international developed equity markets since 2005, an equal weighted factor portfolio as well the performance of the MSCI EAFE as our performance reference.  Note that, for the last 13 years, value has been the poorest factor by far, while the others have handily beaten the EAFE.  An equal weighted portfolio of all 5 factors, while not as optimal as some of the individual factor results, beats the EAFE by 1.6% and has an information ratio, or risk adjusted returns that are superior by 37%.  The equal weighted factor portfolio also has the advantage of not having to predict which factor will work when, so even when a factor like value does not beat the market, the other factors can pick up the slack.

The equal weighted factor portfolio has one other advantage over the market cap weighted alternative. Note in the chart below how well the portfolio outperformed in the 2008 crisis, so it tends to do relatively well in highly volatile sell offs.

While it’s not inconceivable that one or two of these factors could erode, or underperform for a stretch, the fact that you have exposure to multiple factors in a portfolio that seems to do especially well in crises suggest the multi-factor blended portfolio remains the most attractive way to invest in developed markets.




How to think about the impact of Currency on a Portfolio

This article was written with Chris Shuba and Joe Mallen of  And has appeared here in ETF Trends


When considering how currencies affect US $ portfolios, one must think about four things:

  • Buying a foreign currency asset is a bet that the US $ will decline.
  • The longer-term contribution of currencies to portfolio returns and volatility can be substantial.
  • Some currencies have hidden regime jumps or shock risks.
  • Will the US $ decline or rise the currency you invest in.

First, quite unlike stocks or bonds, currencies have no inherent value, only relative value, and when you make a relative value investment, you bet on one instrument rising more than another. That is because a currency only has value relative to what it can be exchanged for, whether that is the Japanese Yen, Gold or Bitcoin.  Thus, putting money in a foreign currency means that you are implicitly expecting that currency to rise relative to the dollar, or for the dollar to fall relative to the currency that you bought.

For example, when you buy a broad non-US ETF like JPMorgan Diversified Return International Equity ETF (JPIN), you assume that over time a diversified basket of global stocks will rise, and simultaneously assume that the US $ will fall in value.  The changes in both the portfolio of stocks and the portfolio of exchange rates affect your $ PL.  In the example given, let’s say it’s a global stock market holiday and every equity market in the world closes for a 4 day weekend, but the currency markets remain open.  Over that long weekend, the value of the stocks in JPIN will remain unchanged, but a 3% decline in the value the US $ relative to the currencies in the ETF will cause the value of your investment in JPIN to increase by 3% in dollar terms.

Second, while one might not think that exchange rates contribute to a long-term investment in an asset in another currency, the fact is they do.  Consider the table below, which shows the annual volatility of the exchange rates of several countries vs. the US $, as well as the annual volatility of long-term bonds and stocks in the same country.

As you can see in the first table, Annual Volatility of Three Assets Since 1973, on average, the annual volatility of long-term (10 year) bonds in major developing countries has been about 7% vs. 11% for the currency.  For stocks, the average annual volatility has been 18% vs. 11% for the currency.   However, it is the second table, The Volatility Contribution From the Currency to a US $ Investor’s PL in Foreign Bonds & Stocks, that tells the real story.  On average, 61% of a US investor’s foreign bond PL is determined by changes in the exchange rate, with only 39% coming from the performance of the bond itself.  That is the majority.  So, if you buy foreign bonds, it makes sense to hedge.  With stocks, more than a third or 37% of a US investors PL is driven by the currency change.  Put another way, 37% of your foreign stock PL is being determined by a factor that is extremely hard to predict.

Third, currencies occasionally make large, unexpected moves.  These large changes are usually a currency devaluation relative to the US $, though not always.  Latin American currencies, in particular, have a long and colorful history of dramatic collapse.  Devaluations naturally cause a US $ investor to lose money on the currency part of their investment.  Also, devaluations are usually inflationary and negatively impact holdings of local bonds, because local interest rates typically will rise.  The impact of a currency shock on local equities is not always as predictable.  Stocks that are highly dependent upon local or foreign currency debt, fall as rates rise and their foreign debt obligations increase, but an export company with little debt will likely see its share price skyrocket because the firm is now internationally more competitive.

For US investors, currency shocks are not always an emerging market issue.  In the last few years, the UK and Switzerland have both experienced significant sudden changes in their currency value, because of the Brexit vote and an abrupt change in Swiss Central Bank policy.  Should Denmark suddenly decide to uncouple the Krona from the Euro, or Hong Kong or China decide to make their currencies more free-floating, there would be massive changes in the exchange rate.  These large potential changes in currency value, whether in emerging markets or the developing world are something investors need to be aware of.

Finally, one must consider the future direction of the US $. If it declines, foreign currency investments gain in dollar value, and if it rises, these same investments decline in dollars.

On the one hand, the US $ has some major pluses.  For now, at least, it remains the world’s reserve currency.  Our relative geographic isolation means the US is where funds typically come in times of geopolitical trouble.

US growth is strong relative to much of the developing world, which makes it attractive to capital seeking higher growth rates.  And, the US Central bank is raising rates, so it is attractive from a relative interest rate perspective.

On the other hand, the US $ has declined a great deal vs some major trading partners over the last 40 years.   In the 1970s, a dollar bought up to 360 Yen; now it buys 110.  In the late 1980s, one US$ could buy 10 and even 12 Renminbi on the black market; now a dollar buys 6.5 Renminbi.  Over the long-term, countries with high savings rates and current account surpluses tend to see their currency rise relative to countries with low savings rates and large current account deficits (who must fund their spending by importing capital from abroad).

The US Current Account is still in the red (though much smaller than several years ago), and US savings numbers have improved.  That said, remember that currencies are a relative value investment.  Compared to thrifty East Asia, the long-term US numbers are not as attractive.  The fundamentals for the rest of the world relative to the US are not as crystal clear.

The US currency is also affected in the short-run by both current political policy and the business cycle.  Trade wars and ballooning public deficits don’t inspire confidence among foreign investors.  And if foreign investors choose to keep their money at home, it would cause the US $ to decline and US interest rates to rise.

Inflation and higher interest rates are the other related factors that will impact the US $ in the near term.  As noted above, higher relative interest rates and relative growth rates have attracted foreign capital to the US.  But if there is the perception that these higher rates of growth and yields are being eroded by uncontrolled inflation, and that the Federal government cannot control its spending and the Fed is behind the curve, foreigners will reduce their US investments.  Inflation, when it is perceived to be too high, will cause a currency to lose value, because it destroys purchasing power.  Unfortunately, trade wars as well as a decline in the US $ can further exacerbate inflation by making imports more expensive.  To date, we have not seen a run on the dollar or inflation reach a dire tipping point that would drive interest rates up and asset values down, but the probability of this happening has increased.

Will the next 40 years look like the last 40 years for the US $?  No one can know for certain.  However, in a future post article, we will show how this gradual decline in the US $ has been one of the major benefits US $ investors have gained in the past by putting their money to work in foreign equities.


Timing the S&P 500 Since 1950

Market timing is hard.  In fact, there are very few strategies that have historically beaten a buy-and-hold (B&H) index strategy.  The simple strategies that do appear to beat buy-and-hold do NOT have a lot of sample size, so they better be logical to you.  As we will show below, there are two simple strategies that do offer above average market returns for an investor historically, but they don’t come around every day.

For reference, the average 10 year annualized return for the S&P 500 has been 6.94% since 1950.  That is our benchmark.

Our timing strategies fall into two camps.  First, buy large declines, a mean reversion strategy predicated on the belief that a decline in prices is a great value opportunity.  Second, only buy when the market is making new highs.  If you look at the table below, you can see that neither strategy by itself is particular effective, or beats B&H until you start using more extreme versions.

Buying the stock market when it is making all-time highs produces inferior returns relative to buy-and-hold.  It works only if the market has NOT made an all-time highs in the prior year.  But since 1950 this set of conditions has only occurred 13 times.  That said, this strategy has produced 94 basis point of excess return over B&H.  It’s also somewhat logical when you consider supply and demand.  If the market just starts making new highs after a prolonged period of sideways or downward movement, there are enough people who still have not bought in yet.  There remains some market capacity to discount future positive events.  Not everyone is bullish yet.   It also is a strategy that means you are not likely to invest right before financial Armageddon, though there is obviously no guarantee.

By contrast, buying declines in the market has worked only when you get really large declines.  If the market declines 25% or 35%, you do not beat buy-and-hold.  Buying any of the 52 days that the S&P 500 declined more than -45%, has produced 10 year returns that are only 11 basis points better than B&H.  Its only if you bought on the 4 days in the last 7 decades that the market declined more than -47.5% that you really do much better than buy-and-hold.  That’s once every 17.5 years, so be prepared to keep your powder dry a long time.   This strategy also needs to come with the caveat that the few times it doesn’t work can be painful.  Using this in Japan in the 1990s or in the US during the 1930s would not have worked.  Markets don’t always mean-revert.  Just because something has gone down -47.5% does not mean it can go down another 50% or more.

An Update on the Selling Volatility Overnight Anomoly

The charts below pretty much speak for themselves.  Selling volatility intraday has been a path to the poorhouse.

While selling volatility overnight through the recent storm has been a bit painful, your positive PL for the last 14 months remains healthily intact.

By contrast, selling vol intraday has been a good path to bankruptcy.

The lesson: if you can sell vol on a short-term basis, do it overnight.