Volatility is all About Liquidity

The S&P 500 tried to pull back yesterday, but as usual the late day trading pushed the loss to just 65 bps. This has become the normal market. In 2012, volatility puttered at 12.77%. In 2013 it fizzled down to 11.07%. YTD we have crept up to 11.73%. These metrics tell you to expect daily gains and losses to be +/- .75%. Very Exciting.

Long-term Complacency

If you have been watching market news over the last few months, there have been plenty of articles talking about how low the VIX has gotten and how we are back to levels not seen since 2007 or earlier. What they do not talk about is how the VIX is extremely short sighted.

Anyone See a Correlation?

I have been told that China is slowing down. I have been told that with the US Fed tapering, some money is being drained out of the Emerging Markets and going to the United States. I have been told that the Emerging Markets will have reduced competitiveness that will benefit the United States.

GMO Calls for Another Ugly Decade of Equity Returns

Unlike the investment banks that prioritize making money off of their clients, GMO seems to think making smart investment decisions is the more important job. On an annual basis GMO releases their 7 year forecasts for different asset classes. Most recently they released a rather uninspiring forecast that puts US equities as one of the least attract…

Investors Love Obamacare

Some of the most unpopular policies often create tremendous opportunities. Take the Affordable Care Act for example. While the public is complaining bitterly about this legislation, some investors will be (or already have been) profiting handsomely. Venture capital firms for example are expected to rake it in by funding companies that provide healthc…

Bitcoin Mania Part II

There are three factual statements to be made about Bitcoin: 1. It has created Millionaires 2. It has captured the minds of millions who would like to become millionaires 3. It will bust again    

The World is Watching the Setting Sun

Japan has become our petri dish for central bank efficacy. Much of the market action over the last few weeks has been driven from news coming from Japan. When the Yen strengthens, markets fall and vice versa. The question everyone is asking is whether central banks are heading down the right path or bound to lose control.

Volatility is Smiling

The Credit Suisse Fear Barometer has dropped like a rock since the beginning of May (see figure 1).

This has little to nothing to do with implied volatility dropping and everything to do with the shape of the implied volatility curve.

Where is the Volatility?

So riddle me this – Is the 10 year treasury at 1.76% telling me

1) that bonds are an inferior investment and we should all be plowing into equities?
2) that QE is an infinite cure to the common cold and interest rates no longer matter (so plow into equities)?
3) that a 1.76% yield combined with 1.5% inflation might just predict a rather sou…

Where Have all the Market Makers Gone?

By Surly Trader The market can often seem like it has a case of Memento.  One day we are trading euphorically upward (like today) and the next we see a panic stricken sell off.  I have made a point in the past that I believe the positive (or negative) feedback loops are stronger in modern markets, that high frequency […]

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Market Volatility and Returns

Do returns dictate volatility or does volatility dictate returns? It might seem like a silly question, but one that is worth spending a bit of time on. If market returns actually followed normal distributions, then we might expect that there are as many up days as down days and upside deviation equals downside deviation.

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Do Gas Prices Provide a Good Market Indicator?

There are many reasons that gasoline prices might be a good predictor of market conditions. Spikes could be due to: 1) robust economic growth and subsequent demand 2) easy monetary policy and printing of money which devalues the currency (thereby increasing nominal asset prices) 3) foreign affairs risk flare ups as we often see in the middle east…