Bright, Shiny Objects
Interfering with reality.
“Banks don’t go out of business taking risk, they go out of business levering the things that they’re told aren’t risky.”
If you missed my discussion on December 1 with Demetri Kofinas, here’s the first hour. I will post the second hour for paid subscribers when Demetri gives the ok (Hiddenforces is a part-subscription podcast).
The CBOE Volatility Index (VIX), which measures anticipated 30-day volatility across options tied to the S&P 500, settled at 12.07 on Tuesday for its lowest close since fall 2019 [when the Fed restarted QE after rates spiked - rh] and marked its 19th consecutive session south of 14 today (the gauge’s average reading over the past three decades stands near 20). That preternatural calm marks a striking contrast with last year’s experience, as realized S&P volatility registered at its sixth-highest annual clip going back to the Great Depression, analysts at Bloomberg find.
The shrunken VIX “point[s] to a degree of over-confidence” in the market, strategists at UBS write, as market expectations of several rate cuts alongside brisk earnings growth in 2024 leaves limited room for error. “Economic data will need to walk a fine line in the coming months to sustain the recent rally. . . equity markets are already pricing in plenty of good news. As a result, we expect a return to more normal levels of volatility.”
I’ll just note that this headline is during a period universally hailed as “the greatest economy in the history of the universe,” (and also because I can’t stand Gavin Newsom). Also, states can’t print money like the Feds: California Has a $68 Billion Budget Deficit With Only $30 Billion in Reserves
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