Poor planning
March 3, 2021
–After the surge in implied vol late last week, followed by the implosion the first two days in March, I can only refer to the Bricklayer’s accident report, which I reproduce here in full:
Dear Sir:
I am writing in response to your request for additional information in Block #3 of the accident reporting form. I put “Poor Planning” as the cause of my accident. You asked for a fuller explanation and I trust the following details will be sufficient.
I am a bricklayer by trade. On the day of the accident, I was working alone on the roof of a new six-story building. When I completed my work, I found I had some bricks left over which when weighed later were found to weigh 240 lbs. Rather than carry the bricks down by hand, I decided to lower them in a barrel by using a pulley which was attached to the side of the building at the sixth floor.
Securing the rope at ground level, I went up to the roof, swung the barrel out and loaded the bricks into it. Then I went down and untied the rope, holding it tightly to insure a slow descent of the 240 lbs of bricks. You will note on the accident reporting form that my weight is 135 lbs.
Due to my surprise at being jerked off the ground so suddenly, I lost my presence of mind and forgot to let go of the rope. Needless to say, I proceeded at a rapid rate up the side of the building.
In the vicinity of the third floor, I met the barrel which was now proceeding downward at an equally impressive speed. This explains the fractured skull, minor abrasions and the broken collarbone, as listed in Section 3, accident reporting form.
Slowed only slightly, I continued my rapid ascent, not stopping until the fingers of my right hand were two knuckles deep into the pulley which I mentioned in Paragraph 2 of this correspondence. Fortunately by this time I had regained my presence of mind and was able to hold the rope, in spite of the excruciating pain I was now beginning to experience.
At approximately the same time, however, the barrel of bricks hit the ground-and the bottom fell out of the barrel. Now devoid of the weight of the bricks, the barrel weighed approximately 50 lbs.
I refer you again to my weight. As you might imagine, I began a rapid descent down the side of the building.
In the vicinity of the third floor, I met the barrel coming up. This accounts for the two fractured ankles, broken tooth and severe lacerations of my legs and lower body.
Here my luck began to change slightly. The encounter with the barrel seemed to slow me enough to lessen my injuries when I fell into the pile of bricks and fortunately only three vertebrae were cracked.I am sorry to report, however, as I lay there on the pile of bricks, in pain, unable to move and watching the empty barrel six stories above me, I again lost my composure and presence of mind and let go of the rope.
http://www.physics.smu.edu/scalise/www/misc/bricks.html
So here we are. These are atm straddle prices for TYJ:
2/23 vs 134-105 1’21,
2/24 vs 134-025 1’25, (loading the barrel)
2/25 vs 132-185 2’09 (the sixth floor),
2/26 vs 132-23 1’48 (in the vicinity of the third floor),
3/1 vs 133-08 1’24 (nearing ground level)
3/2 vs 133-175 1’13 (on the pile of bricks)
–Yesterday featured a flatter eurodollar curve, led higher by blues which ended up 6 on the day. The ten year note fell 4 bps to yield 140.3. However, there was still notable buying of blue midcurve put spreads vs selling of call spreads. For example, new open interest of 26k was a buyer of 3EN 9850/9812ps (8.75s) vs 9887/9912cs (6.0s), vs EDU’24 9864.5. Paper paid 3.5 early with 35d vs 9862.5. Also heavy buying of EDU2/EDZ2 at 10.5/11, settled 11.5, leading to a jump in open int of 81k to 682k in EDZ2 on new shorts there. (EDU2 rose 20k).
–Powell speaks Thursday, with Brainard laying the groundwork yesterday. The Fed is dismissive of upcoming inflation data and current price surges. That message, having been repeated several times recently, provides no comfort to long bond holders (let go of the rope).
–From Brainard: “A burst of transitory inflation seems more probable than a durable shift above target in the inflation trend and an unmooring of inflation expectations to the upside. …These changes mean that we will not tighten monetary policy solely in response to a strong labor market. The long-standing presumption that accommodation should be reduced preemptively when the unemployment rate nears estimates of the neutral rate in anticipation of high inflation that is unlikely to materialize risks an unwarranted loss of opportunity for many of the most economically vulnerable Americans.”
