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Any thoughts? ISTM there’s a lot of fear in the markets. A whole lot of things that could go wrong: China, Russia, a potential U.S. credit default, a steeply inverted yield curve / likely recession, troubled regional banks, raucous politics. So why is the “fear gage” not elevated?
I’m sure there’s a reason. Just not seeing it - VIX
The reason is complacency. The last raging bear has been just long enough for people to forget the pain or young enough to have never experienced it before. Spikes to 70-80 back in the day.
Tend to agree with Shipwreck. I’ve long kept a minuscule position in SPDN as part of a hedge position (SPDN = around 2% of portfolio). Doesn’t amount to a hill of beans, but tempers downside on some days and allows for taking more risk in other areas. (And I expect to lose $$ on it.) So the thought today was to sell SPDN and move temporarily into TAIL which more closely corresponds to changes in the VIX. I believe it would provide a better offset near term were someone so inclined. But decided against it. One problem is knowing when to move back out.
The charts back to 2020 show a reading of 16 on VIX to be very low. On a couple instances it dropped to around 10 - but didn’t stay there long. TAIL (etf) has been hampered in recent years by extremely low returns on treasury bonds in which it invests. So, I’m thinking that now with higher rates its better days (as an effective hedge) are probably ahead.
Heads Up - If you’re wondering what turned the markets around in the last hour today, it may be related to Mitch McConnell making a statement around 3 PM saying he believes the deficit dispute will be resolved in time to avoid default. Just my guess. As far as bearish sentiment today, that came in part from Evercore’s Ed Hyman interviewed on Bloomberg extensively this AM. (I actually copped some of Hyman’s concerns in writing my OP.)
I find it quite remarkable too that VIX is at current levels with everything going on. Methinks that VIX is being manipulated too just like rest of stock market.
There are now several VIXs. The default VIX is really VIX30D.
The newest VIX1D is showing very high daily volatility as it is affected by volatility-decay as the 0DTE (near day-start) approach expiry and more 1DTE (near day-end) are picked up. So, one pattern is that it starts out at a lower value and ends with a higher value. Another is that VIX1D << VIX, except on unusual days.
Volatility has come down for stocks (US, EMs), oil, gold, but remains elevated for bonds. The anxiety/pressure may be building for bonds that may spillover suddenly into other areas.
Comments
The reason is complacency. The last raging bear has been just long enough for people to forget the pain or young enough to have never experienced it before. Spikes to 70-80 back in the day.
The charts back to 2020 show a reading of 16 on VIX to be very low. On a couple instances it dropped to around 10 - but didn’t stay there long. TAIL (etf) has been hampered in recent years by extremely low returns on treasury bonds in which it invests. So, I’m thinking that now with higher rates its better days (as an effective hedge) are probably ahead.
Heads Up - If you’re wondering what turned the markets around in the last hour today, it may be related to Mitch McConnell making a statement around 3 PM saying he believes the deficit dispute will be resolved in time to avoid default. Just my guess. As far as bearish sentiment today, that came in part from Evercore’s Ed Hyman interviewed on Bloomberg extensively this AM. (I actually copped some of Hyman’s concerns in writing my OP.)
There are now several VIXs. The default VIX is really VIX30D.
The newest VIX1D is showing very high daily volatility as it is affected by volatility-decay as the 0DTE (near day-start) approach expiry and more 1DTE (near day-end) are picked up. So, one pattern is that it starts out at a lower value and ends with a higher value. Another is that VIX1D << VIX, except on unusual days.
Volatility has come down for stocks (US, EMs), oil, gold, but remains elevated for bonds. The anxiety/pressure may be building for bonds that may spillover suddenly into other areas.
https://finance.yahoo.com/quotes/^VIX1D,^VIX9D,^VIX,^VIX3M,^VIX1Y/view/v1