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The Greatest Short – why all correlations are moving to 1

I was quite surprised to find this on 0hedge with no reference to iTulip.
I have not noticed him posting anywhere else previously, at least not as “Finster”.
He does of course keep his Finster Financial Forecast, but no blog or discussion there.

The Greatest Short – why all correlations are moving to 1

Liquidity moves markets!

Follow the money. Find the profits! 

Why do all correlations go to one recently, even in asset classes or sectors which traditionally have moved with a negative beta?

I will attempt to provide an explanation, which rests on understanding the fractional reserve banking system and it’s intermediation of the currency we use in everyday purchases as well as in investing.

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For the private and institutional investor the fundamental question in this market is: Do I go long currency or long assets/loans (credit). If you go long currency, you effectively take the opposite side of the banks. Is this a wise choice?

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