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OPTO Sessions Jeff Ross on the reflation to deflation trade, #Wyckoff accumulation and three themes to watch

Dr Jeff Ross is the founder of Vailshire Capital Management. The hedge fund has returned triple-digit gains in the past year by employing an innovative all-weather, full-cycle portfolio strategy.

In this week’s episode of Opto Sessions, Ross considers the potential implications of a stronger dollar and how the reflation and deflation trade might play out. But first, he dived into a topic on which he is a fountain of knowledge — bitcoin.

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Ross suggests that the cryptocurrency is likely to remain choppy for a while longer, but that this may also provide some useful insight into broader markets. “I actually think bitcoin is sort of becoming the canary in the coal mine,” he tells Opto Sessions.

He points to how the cryptocurrency first dropped in China, where the bitcoin has effectively been banned and mining restricted.

“And so that was the first to dump and it dumped hard right? It dumped over 50% —that’s painful when you have big positions in bitcoin. But I think that it may also be the canary in the coal mine for a return of risk on,” Ross explained.

“There’s a chance that we see bitcoin start to return back and start to approach new all-time highs within the next couple of months”

“There’s a chance that we see bitcoin start to return back and start to approach new all-time highs within the next couple of months.”

Ross emphasised that he thinks that the markets are currently exhibiting a transition phase, and as such he expects to see “choppy, sideways price action” on everything from commodities to stocks.

“People are buying stocks, but it reminds me of the last big dance before the music stops. I would not be surprised if we saw a return of volatility very soon,” he explains.

As such, Ross says, his hedge fund has begun going long on volatility. Since seeing a big spike in volatility following the rise of COVID-19 in March last year, and a slow decline since, Ross thinks people may be getting complacent.

“People are buying stocks, but it reminds me of the last big dance before the music stops. I would not be surprised if we saw a return of volatility very soon”

“This is when my spidey senses turn on [and] my antenna go up. I start getting concerned that things are getting a little too complacent and it’s probably time to start buying insurance on our portfolios,” Ross stated.

 

To hear more from Ross on what the reflation and deflation trade might look like, as well as what themes he’s watching, listen to the full episode of Opto Sessions.

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Listen to the full interview and explore our past episodes on Opto Sessions.

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