Past Fear, Present Fear

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I was looking at the entire history of the volatility index (the oft-cited “VIX’) and found an interesting parallel. Take note of this chart


So what we have here is:

+ Cyan tint – a grinding, multi-year slide following the bursting of a gigantic bubble. In this instance, it was the bursting of the Internet bubble, and during Greenspan’s deliberate inflation of the housing bubble, investors got calmer………..and calmer.

+ Yellow tint – The slide seemed to be over, and there was a period where fear seemed to be coming back. However, it really never seemed to take hold.

+ Magenta tint – Just when it seemed that fear was forever outlawed, and the VIX cracked briefly to lows never seen before (Grey tint), there was a sudden burst higher in volatility. In the case of February 2007, it was when the Chinese stock market made a brief tumble.

+ Green tint – Nope, the fear index falls back again to similar levels it has been grinding around at for a while. The “VIX fix” seems to be permanent.

Now take a look at more recent history, and apply every single one of those descriptions to the chart below. The only difference I see is that the most recent burst (Magenta) was muted compared to the one from 2007.


Of course, after nearly six years of this nonsense, even someone like me starts to worry that, for the first time in the history of the universe, It Really Is Different This Time. But, ummm, that’s kind of what they want us to think, isn’t it?