A ‘Sudden Spike’ And ‘Greater Volatility Amplitude’
How many times are we going to revisit the low vol. story?
That's a dumb ass question. That's like asking when people are going to stop talking about Bitcoin.
People will stop talking about it when things return to some semblance of normalcy, although to be sure, it's no longer clear what "normal" even means for vol. Because between dramatic shifts in market structure (VIX ETPs, vol. as a favorite momentum trade, vol. targeting strats, etc.) and central banks effectively acting as vol. sellers
Fear and greed reign supreme–even among the machines.
For grins, I superimposed the TED spread on FRED’s VIX series https://fred.stlouisfed.org/series/VIXCLS , applying the formula (a*15)+10 on TED to put them at similar scale. Kind of interesting – spikes sometimes concurrent though since 2011 TED lags VIX about 2-3 months.
Interesting, Doug – I had an old chart saved in my FRED file with TED, VIX and the HY spread. I used a*10+8 to adjust TED in mine but yours seems to work better over time. Regardless, though, the TED spread has been in the basement for a while. Between TED and the HY spread, the two have been pretty reliable precursors (or at least confirmations) of elevated and declining VIX – until the first two weeks of November – big divergence between TED (dropping like a rock) and the HY spread – rising fro the first time in a while. Turns out the junk spread was right as to the VIX making a meager attempt to rally.
Between that and emotions, it cost me some lost opportunity after selling off more equity in Nov. At least I unloaded some of the hedges along with it.
Now down to financials, healthcare, industrial, and a small allocation to special situation value deals.
I have no idea what to think any longer. On the one hand you have the chart gurus selling their ping-pong pinball wizardry, then you have the fear mongers who are just trying to jack retail out of their positions to get the equities cheaper, and the promoters trying to tell you the market is cheap.
The bond market is simply “out of service” and that makes any decisions as to asset allocation meaningless other than on a day-to-day basis. Until debt is marked to market I have no idea where were are.