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.”

David Dredge

• 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).

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From Grant’s:

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.” 

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• 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