Posts filed under “Contrary Indicators”

VIX: Where is the Panic In the Markets?

Click on chart for larger image


Despite the concern about the economy, Greece, China, etc., and general sentiment readings, the VIX remians surprisingly low:

BusinessWeek: No Panic in Options After VIX Takes Six Weeks to Exceed Average

It took six weeks of equity losses, a series of lower-than-estimated economic reports and political turmoil in Greece to finally drive the options gauge known as the VIX above its long-term average. The Chicago Board Options Exchange Volatility Index rose 17 percent to 21.32 yesterday, topping its 21-year mean of 20.34 for the first time since March 21, according to data compiled by Bloomberg. The VIX averaged 17.44 since the Standard & Poor’s 500 Index, the benchmark measure of U.S. stocks, began falling after reaching an almost three-year high on April 29. The options measure failed to surge even after the Citigroup Economic Surprise Index sank to minus 117.20 this month, meaning data missed projections in Bloomberg surveys by the most since January 2009. The response shows there’s no panic among investors buying and selling equity derivatives. . .”

Jim Bianco of notes the following about the VIX:

“In both normalized measurements, the present VIX reading is just over its trend curve. This is a market simply unwilling to acknowledge anything unusual might be underway.

As the spate of negative economic news and the largest one-day selloff since August 2010 have not been kept secret, we have to conclude one of two things: Either the options market is correct or option buyers have been blinded by, well, blind faith. It is quite possible the latest spate of negative news is simply one in a series of crises since March 2009 that have generated a great deal of excitement and then were buried in the next rally. For more than two years, the the bears have made the headlines and the bulls have made the money, much to the consternation of the bears.

Still, as noted in March, it would be better to see a rising VIX in such a situation. What never has changed and never can change are the mechanics of market-making; each purchase of protection in the put options market or in floating-rate receiving on variance swaps demands market makers sell ever-greater quantities of stock at ever lower prices to hedge. If the present complacence is incorrect, the subsequent adjustment will be harder and more violent than it would have been otherwise.”

Category: Contrary Indicators, Markets, Psychology, Technical Analysis

Checklist: How to Spot a Bubble in Real Time

Are the Linked In/Groupon IPOs proof we have a new bubble in Tech? Are US Treasuries a bubble? Commodities? There have been numerous attempts by many Fed economists to argue that bubbles cannot be seen as they happen, and they we can only spot them after the fact. I believe they are incorrect. We can…Read More

Category: Contrary Indicators, Psychology, Trading

Uh-Oh: Gold on the Cover of NYT Magazine ?

I am not quite sure what to make of this NYT magazine cover. On the one hand, it is gold on the cover of a mainstream magazine. But its less convincing as a magazine cover contrary indicator. Compare it to the Housing peak covers in Fortune (May 2005) or Time (June 2005). The focus here…Read More

Category: Contrary Indicators, Gold & Precious Metals

Short Memories (Fade the Inflation Hysteria, II)

Flashback to June 2008 (only three short years ago): Headline CPI was running very close to 5.0 percent.  The Fed funds rate was at 2.0 percent.  Brent crude was $132/barrel.  The Fed’s June 2008 minutes mentioned the word “inflation” 110 times (“deflation” and “disinflation” combined:  zero), and also contained this caveat (emphasis mine): With increased…Read More

Category: Contrary Indicators, Cycles, Data Analysis, Economy, Federal Reserve, Inflation

World Gold Bug Article on WSJ Front Page

Front page WSJ story today — World Is Bitten by the Gold Bug: “Gold continued its upward march in a time of global financial tumult, closing above $1,500 an ounce Thursday for the first time as investors seek safe haven in the metal. In a remarkable performance for any sort of asset, gold has notched…Read More

Category: Contrary Indicators, Gold & Precious Metals

Michael Burry: Notes from Vanderbilt Speech

Hunter is the author of the Distressed Debt Investing blog. His commentary has been seen in online versions of WSJ, FT, and BusinessWeek. Hunter currently works as an investing professional at a large money manager, focused on the credit markets. Previously, he worked at two large hedge funds, as an analyst working on distressed debt…Read More

Category: Contrary Indicators, Investing

Top 10 Signs Silicon Valley is on Tilt Again

It’s apparently that time again — the Valley has gone on tilt. Consider the following top ten signs. 10. Conferences are selling out 9. Venture capitalists are launching blogs 8. Everyone you know has a startup 7. Harvard MBAs are trekking to “hot” events, like SXSW 6. Harvard MBAs are fundable as CEOs 5. Private…Read More

Category: Contrary Indicators, Venture Capital

Time Magazine Covers & the Stock Market

I firts showed this back in November 2008. I wanted to show it again — this time using Slideshare, a nice Powerpoint/PDF presented. My only caveat is the time period. Its one that encompasses the greatest bull market in history. I would be more interested in seeing this across multiple secular markets — say, 1946…Read More

Category: Contrary Indicators, Financial Press, Think Tank

Guru Time of Year

Yes, its that time of year when all the Gurus come out to discuss what the markets and the economy will be doing in the coming 12 months. These tend to fall into several categories: 1) Asset managers talking their books; 2) the Perma-bulls and bears do the usual debate; 3) A series of confirmation-biased…Read More

Category: Apprenticed Investor, Contrary Indicators, Investing, Markets

Fund Flows: Bond vs Equity

> The chart above, courtesy of Bianco Research, gives you a sense of how much enthusiasm there has been for Bonds, at the tail end of a 30 year bull run in fixed income, following the 2008 credit crisis and market collapse. Note that even after the equity market began to rally, it was still…Read More

Category: Contrary Indicators, Investing