Get Ready For A Wild Time In The Markets As Volatility Increases | Cem Karsan

Long vol may be one of the better risk/return opportunities right now

IMPORTANT NOTE: tickets for our Spring online conference are now available at the Early Bird discounted price (our lowest!). So, if you haven’t yet, get your ticket now!

---

When today's guest was on this program back in September, he predicted the market would start to become more volatile.

He didn't necessarily think that would mean lower stock prices into the end of 2024.

And he was proven correct.

But he did express worry that as we entered 2025, continued higher volatility could start to become a problem for investors.

Does he still think that?

To find out, we welcome back to the program Cem Karsan, Founder, CIO, and Managing Principal of Kai Volatility Advisors, widely known as @jam_croissant on X/Twitter.

Cem thinks being long volatility may indeed be one of the best risk/return opportunities in the market right now.

To understand why, click here or on the video below:

SET YOURSELF UP FOR SUCCESS IN 2025: The New Year has begun! Schedule a free, no-commitment consultation with one of Thoughtful Money’s endorsed financial advisors now to identify the right steps to position your portfolio advantageously for 2025:

---

I’m so grateful to everyone who has kindly supported me by becoming a premium subscriber to this Substack. It’s making an important difference in helping me fund the substantial operating costs of running Thoughtful Money.

Premium supporters receive my “Adam’s Notes” summaries to the interviews I do, the wildly-popular MacroPass™ rotation of reports from esteemed experts, VIP discounts, plus periodic advance-viewing/exclusive content. My Adam’s Notes for this discussion with Cem are available to them below.

If you, too, would like to become a premium subscriber to this Substack (it’s only $0.52/day), then sign up now below:

---

Adam’s Notes: Cem Karsan (recorded 1.24.25)

EXECUTIVE SUMMARY:

• Cem predicted an increase in market volatility beginning in late 2024, which he believes will continue into 2025. He notes two distinct paths for market behavior: if liquidity injections are made early in 2025, markets might experience a significant short-term rise, but this could lead to an unsustainable "blow-off top" resembling the late 1990s. On the other hand, if liquidity is not injected, markets could face severe downward pressure due to tightening liquidity conditions. He emphasized that either scenario would result in heightened volatility, presenting challenges and opportunities for investors.

• Cem describes the current economic environment as precarious, with market valuations appearing historically expensive. He warns that after two years of approximately 50% aggregate returns in equity markets, the likelihood of a sustained upward trend diminishes. He compares the current situation to the late 1999 period, where speculative fervor and inflated valuations preceded a dramatic market correction. This suggests a potentially unsustainable situation that could unwind over the next few years, especially if fundamental economic growth cannot justify current asset prices.

• Liquidity is a central theme in Cem's analysis. He differentiates between fiscal liquidity, which directly injects money into the economy to spur demand, and monetary liquidity, which largely benefits producers, corporations, and investors. Fiscal liquidity tends to have a higher velocity and immediate impact, while monetary liquidity can have a deflationary long-term effect by lowering costs and increasing competition. Cem highlights the risks of dwindling liquidity as stimulus measures wind down and the Federal Reserve faces constraints in its ability to respond effectively due to inflationary pressures.

• Volatility Investment Strategies: Cem strongly advocates for