Category Archives: investing

The VIX is too low!

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September 30, 2017 —   During most of this year, the VIX — the Volatility Index on The Chicago Board Options Exchange — has been at the lowest levels of the last ten years.  It recently dipped below 9, even lower than March 2007, just before the sub-prime mortgage crisis. It looks as though, once again, investors do not sufficiently appreciate how risky the world is today.

Known colloquially as the “fear index,” the VIX measures financial markets’ sensitivity to uncertainty, in the form of the perceived probability of large changes in the stock market.  It is inferred from the prices of option on the stock exchange (which pay off only when stock prices rise or fall a lot).   The low VIX in 2017 signals that we are in another “risk on” environment, when investors move out of treasury bills and other safe haven assets and instead “reach for yield” by moving into riskier assets like stocks, corporate bonds, real estate, and carry-trade currencies.

Figure 1: The VIX is at its lowest since 2007

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Let the US Fiduciary Rule Go Ahead

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(Feb.24, 2017) The quantity of financial regulation is not quite as important as the quality.  One must get the details right.  The case of the US “fiduciary rule” strongly suggests that President Trump will not get the details right. Continue reading

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No, Japan Does Not Intervene in FX These Days

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(April 10, 2016) There has been recent speculation that the Japanese authorities might intervene to push down the yen. Continue reading

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