Trader’s Narrative

When you have a comedy show like The Colbert Report mention an esoteric indicator like the CBOE volatility index… you know that things have run their course:

The picture is from Monday’s show in which Stephen Colbert riffed off the “fear index” and mentioned that it “is at an all time high” He then said, “Even worse? The fear index is scared of heights!”.

As I mentioned before, I was in Spain a few years ago and in that trip was introduced through friends to a mutual fund manager. To protect the guilty no names will be mentioned. Over a few drinks talk inevitably turned to the markets and I commented on the VIX index. From the puzzled looks it seemed she didn’t know what it was so asked and once she confirmed that she had never heard of it, I explained it to her and told her where to get more info.

My world was a bit shaken though - how can you manage money without even knowing what the heck the VIX is? Sheesh.

The VIX hasn’t become a household term but, we’ve already seen similar financial spreads and indicators, normally reserved for economists, traders and quant-jocks being bandied about liberally in the news: LIBOR, TED spread, CDS, CDO, etc.

Today continued the divergence between the VIX & the S&P 500 Index (SPX). Volatility barely budging even though the market fell 3%.

You can watch the segment here:

If you are outside the US, tough luck! With the exception of Canadians who can go here.