The anomaly du jour appears to be rising tensions from policies applied versus the natural state of the markets.
The important thing one needs to know is that, has there been pressures from such tensions building underneath?
This from Bloomberg
(bold emphasis mine)
``Investors are guarding against renewed volatility in U.S. stocks even though a so-called fear gauge shows they have overcome the panic resulting from last year’s credit crunch.
``The VIX index, an indicator of expected swings in the Standard & Poor’s 500 Index, closed yesterday at its lowest level since Aug. 29, 2008. The VIX fell 6.9 percent to 20.69, about half a point above its average since the Chicago Board Options Exchange’s calculations began in 1990.
Again from Bloomberg,
``As the CHART OF THE DAY shows, though, the gap between the index and VIX futures is wider than it was almost 14 months ago. The contracts closest to expiration settled yesterday at 23.65, or 2.96 points higher than the index’s value. The differential was just 1.05 points at the end of August 2008.
“Heavy hedging activity” accounts for the wider gap, according to a report yesterday from McMillan Analysis Corp.’s Option Strategist Hotline. The VIX itself has to surpass 24 to signal an increase in stocks’ volatility, which tends to occur when prices fall, the report said.
``The VIX, more formally known as the CBOE Volatility Index, has tumbled 74 percent from last year’s record close. The gauge peaked at 80.86 on Nov. 20, 2008, when the S&P 500 fell to its low for the year."
Additional comments:
Inflationary policies are inherently unsustainable. At the onset inflation has been mainly an asset dynamic.
Nevertheless, policies can lead to the furtherance of inflation (and a diffusion) from which may translate to the extension of today's aberration.
On the other hand, market forces could unravel on the mounting imbalances when inflationary measures can't sustain its levels.
Hedging in the marketplace appears to be looking forward at the latter scenario for 2010.
Anyway, a valued reminder from John Maynard Keynes on mainstream expectations of "desperately seeking normal", ``The market can stay irrational longer than you can stay solvent."
The important thing one needs to know is that, has there been pressures from such tensions building underneath?
This from Bloomberg
(bold emphasis mine)
``Investors are guarding against renewed volatility in U.S. stocks even though a so-called fear gauge shows they have overcome the panic resulting from last year’s credit crunch.
``The VIX index, an indicator of expected swings in the Standard & Poor’s 500 Index, closed yesterday at its lowest level since Aug. 29, 2008. The VIX fell 6.9 percent to 20.69, about half a point above its average since the Chicago Board Options Exchange’s calculations began in 1990.
Again from Bloomberg,
``As the CHART OF THE DAY shows, though, the gap between the index and VIX futures is wider than it was almost 14 months ago. The contracts closest to expiration settled yesterday at 23.65, or 2.96 points higher than the index’s value. The differential was just 1.05 points at the end of August 2008.
“Heavy hedging activity” accounts for the wider gap, according to a report yesterday from McMillan Analysis Corp.’s Option Strategist Hotline. The VIX itself has to surpass 24 to signal an increase in stocks’ volatility, which tends to occur when prices fall, the report said.
``The VIX, more formally known as the CBOE Volatility Index, has tumbled 74 percent from last year’s record close. The gauge peaked at 80.86 on Nov. 20, 2008, when the S&P 500 fell to its low for the year."
Additional comments:
Inflationary policies are inherently unsustainable. At the onset inflation has been mainly an asset dynamic.
Nevertheless, policies can lead to the furtherance of inflation (and a diffusion) from which may translate to the extension of today's aberration.
On the other hand, market forces could unravel on the mounting imbalances when inflationary measures can't sustain its levels.
Hedging in the marketplace appears to be looking forward at the latter scenario for 2010.
Anyway, a valued reminder from John Maynard Keynes on mainstream expectations of "desperately seeking normal", ``The market can stay irrational longer than you can stay solvent."
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