"No warning can save people determined to grow suddently rich" - Lord Overstone

  • 10 hours Major League Baseball Turns To Blockchain Tech
  • 1 day Institutional Investors Hold A Lot More Crypto Than You Think
  • 1 day U.S. Treasury Yields Could Be About To Break Out
  • 2 days Tesla Stock Stumbles On Model 3 Cancellations
  • 2 days Yuan Rebounds At The Expense Of The U.S. Dollar
  • 2 days Iraq Unplugged: No Internet, No Protests, No Money
  • 2 days The Tariff War Could Spark A Debt Crisis In China
  • 2 days Gold Selloff Continues As Dollar Climbs Higher
  • 2 days Gold Investors In A Frenzy Over Sunken Russian Warship
  • 2 days The New King Of Electric Cars
  • 3 days BlackRock Goes Bitcoin
  • 3 days U.S. Banks See Best Earnings Report In Years
  • 3 days The Case For Gold Is Not About Price
  • 3 days Stock Market Sentiment Turns Bullish
  • 3 days What Is Bitcoin Really Supposed To Be?
  • 3 days The Surprising Media Giant Taking On Netflix
  • 3 days Cybersecurity Stocks Are Red-Hot As Election Looms
  • 4 days Americans Grow Weary Of U.S. Trade Policy
  • 4 days What Putin Really Wants From Trump
  • 4 days Europe’s EV Sales Growth Is Slowing
Stock Market Sentiment Turns Bullish

Stock Market Sentiment Turns Bullish

Quarterly earnings reports have lifted…

The Biggest Winners Of Q2 Earnings Season

The Biggest Winners Of Q2 Earnings Season

The second quarter of 2018…

Netflix Shock Hits FAANG Stocks Hard

Netflix Shock Hits FAANG Stocks Hard

Netflix released its surprising second…

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