Spoos are for lovers? Really David? Zervos obviously is a lover.
And of course "Spoos" are the S&P 500 related futures contracts that are traded on the Chicago Mercantile Exchange (CME). And a Spoo is the current, most active contract month trading, either March, June, September, or December. The symbol for the September contract is SPU, thus the name "spoo". "Spoo" is now used to refer to whatever the currnet contract month is.
From: DAVID ZERVOS
Sent: Wednesday, April 17, 2013 7:22 AM
To: John Broussard
Subject: Spoos are for lovers, gold is for haters
As one might have expected, I received quite a number of responses to Monday's commentary. While there were a few that expressed solidarity with the view that this gold sell-off is a POSITIVE sign for the GLOBAL reflation/recovery trade, most of the replies were hostile. I suspect it comes down to sample selection bias - those in agreement never feel as inclined to write back as those who are offended by the thought process. But that said, the markets were surely in disarray as gold repriced lower - and many traders' knee jerk reaction early in the week was to sell risk. As I said Monday, this is GOOD news. Risk is not to be sold on a gold sell-off, it is to be bought!! I fully stand by that view.
And while a bit of sanity returned to the market yesterday with spoos back up towards 1370, I imagine that margin calls, positioning and VAR model changes will keep trading activity "dynamic" for a bit longer. It will be VERY choppy - and it will be hard for many to adjust to the reality of a world where gold can drop 250 bucks in 2 trading sessions. But for those that have never understood the fascination with the shiny 0 real return metal (like me), this has been a long time coming. Gold 200 under spoos feels much more realistic than gold 300 over spoos - thankfully we are back to reality once again!
So lets rehash the basic argument on spoos versus gold. For those who think that the GLOBAL central bank induced portfolio balance channel will force risk taking - that in turn will generate positive real returns to physical capital investment, technological advance, productivity growth, real growth and real job creation; then you are a lover and you should buy spoos. For those who think that the that the GLOBAL central bank induced portfolio balance channel will force risk taking - that will in turn generate negative real returns to physical capital investment, no technological advance, no productivity growth, no real growth and no real job creation; then you are a hater and you should by gold. For the record, I'm a lover, not a hater!! Good luck trading.
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