Volatility

Wed, 2018/02/07 - 4:04pm | Your editor
Printer-friendly version

If you were wondering, we have not had a correction because US stocks so far have not closed 10% below a prior close, the formal definition. But we have seen the volatility demon ending its multi-year hibernation and come roaring back.

So those producing forecasts and strategies based on calm quiet markets continuing are now jumping out of the windows on Wall Street, even if there are no other signs of panic.

Notable suicides include VIX, the VelocityShares Daily Inverse Exchange-Traded Note, crafted by Crédit Suisse to give investors (and professional managers of hedge funds using leverage) a way to make money from low volitility. It is the inverse of betting on the VIX, an ETN which pays when volatility goes up at the CBOE.

CS yesterday announced that the $2 bn ETN redeemed on Feb. 21. The face value of the XIV on that date of course is not yet known. Both CS and the CBOE have been hit by panic sales in turn, which cut their share prices by enough to lead to a trading halt for the Swiss bank. Another reverse volatility funds run by ProShares Safe For Now ProShares Trust II, or SVXY, had its trading halted but did not plan on redemption while iPath S&P VIX Short Term Futures with lower volumes or greater liquidity just continued trading.

I quoted a respected CS equity analyst, James Golub, arguing that US and Canadian company results for the Q4 were showing less bullish surprises over sales, earnings, and earnings per share. I was of course, arguing that there is more chance to make money with stocks from Mr. Golub's alternative investment venue, EAFE, which stands for Europe, Australasia, and the Far East. That is what global-investing.com preaches too.

Having said that, this special sauce is clearly high-risk. And, alas, while we don't own Crédit Suisse we do have a stock in the business of selling high or low volatility, discussed below.

We also have an annual and Q4 report from one of our stocks and news from Britain, Canada, Israel, Denmark, Sweden, Mexico; Colombia, Brazil, Canada, Bermuda, Germany, much of Latin America, California, and Japan. Today's blog is late and is being filed after the market closed, which is unusual.

Full content is available to subscribers only. Subscribe now.