• 7 hours Alibaba Is About To Make History Again
  • 1 day Robinhood Users Are Latest Target Of Pandemic Hackers
  • 3 days The Hydrogen Boom Will Provide A $200B Boost To Wind And Solar Energy
  • 4 days Will The 5G Rollout Overshadow This Major Merger?
  • 5 days Corporate Bitcoin Holdings Boost Crypto Confidence
  • 6 days Indonesia Rolls Out Augmented Reality Innovation To Combat COVID
  • 6 days Banks Are Getting Rich On Pandemic Overdrafts
  • 7 days The Real Reason China Is Betting Big On Renewables
  • 7 days Europe Wants To End The Big Tech Monopoly
  • 8 days New Breakthrough Could Transform Rare Earth Mining
  • 8 days Waymo Set To Roll Out Fully Self-Driving Vehicles
  • 10 days Aramco Dividend Won’t Cover Saudi Budget Gap
  • 10 days Credit Card Debt Plummets Amid COVID
  • 11 days Biden Plan Targets “Wealthy” Taxpayers
  • 13 days McAfee Arrested In Spain On Tax Evasion Charges
  • 13 days South Asia Is Set To Unleash A Flurry Of IPOs
  • 14 days U.S. Takes Stake In Irish Battery Metal Producer
  • 14 days Jobs Report Paints Dire Picture of US Economy
  • 15 days Stocks Rebounding As Trump’s Condition Reportedly Improves
  • 17 days Election Proofing Your Energy Portfolio
How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

  1. Home
  2. Markets
  3. Other

Investors Abandon Hedges: Who Needs Em? The Stock Market Only Goes Up

With volatility at consistently low levels, more investors are revising their strategies on risk. Apparently these is no downside risk anymore as Investors Abandon Hedges.

 
https://s3-us-west-2.amazonaws.com/maven-user-photos/mishtalk/economics/zmfATcSa4EegwR7v_znq6Q/TATTXy-ZmUCIMNLHMHM0Rw
 

After a long stretch of stock market tranquility, more investors are concluding that paying for hedges to protect against any sudden downturn is a waste of money. The S&P 500 jumped 19% in 2017, and the Cboe Volatility Index, known as the VIX, had its quietest year in history. That meant investors who bought such options were often stuck with worthless contracts.

More investors are concluding that during an extended period of low volatility, paying for insurance against wild price swings is a luxury they can no longer afford. Purchasing market protection eats into returns. Already squeezed by competition from passive investments like exchange-traded funds, active managers these days feel they can’t risk falling behind in a rally.

Some data indicates that either demand for protection is low or investors are favoring bullish options on the S&P 500 instead. A measure called skew, gauging the cost of insuring against short-term stock declines, has been near a one-year low, data from Credit Suisse Group AG showed in a December report.

“I haven’t seen hedging activity this light since the end of the financial crisis,” said Peter Cecchini, the New York-based chief market strategist at Cantor Fitzgerald. “It started in late 2016 and accelerated in the second half of the year.”

Sum of Vix Closes Under 10

https://s3-us-west-2.amazonaws.com/maven-user-photos/mishtalk/economics/zmfATcSa4EegwR7v_znq6Q/bIK4lD4ksUOa39UJeCgN4w

 

Blow-Off Top Beginning or Near the End?

Add the above chart to the list of items that suggest the blow-off top is in the very late, not early stages.

For further discussion, please see Hussman Questions Grantham's "Melt-Up" Thesis.

By Mike Shedlock

Back to homepage

Leave a comment

Leave a comment