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Tuesday, April 12, 2016

FEAR AT ALL TIME HIGH - here's what you need to know


WSJ Moneybeat - a measure of fear that you've never heard of before just hit an all time high. Quote:

The Credit Suisse Fear Barometer, which measures the cost of bearish put options relative to bullish call options, rose to a fresh record of 44.7% on Friday. The gauge, which goes back to 1994, is calculated by selling a 3-month 10% upside call on the S&P 500 and using the proceeds to buy downside protection; the barometer’s level shows how far below the current level of the S&P, in percentage terms, an investor has to go to buy a put that makes the strategy’s total cost zero.

Translation: buying downside S&P puts is the newest fad.

So I guess people are looking at this chart:


and they're assuming it's a guaranteed drop from here - either another 10% panty-piddle, or a monumentous crash and burn.

I guess you could expect that level of doomery from some moron blogger or radical Nazi neocon, but it's a bit retarded coming from Wall Street.

Oh well, we'll see how it plays out. Certainly the June Brexit vote, and subsequent telegraphed July Greek debt crisis, and concurrent Republican convention, and ongoing fear of the economic destruction that would be wrought by an eventual Trump (or even Cruz or Ryan) presidency, are multiple reasons to short a market trading at 16x earnings.

In the meantime, gold and gold miners have outperformed the S&P 500, and they're a kiddie pool of liquidity compared to the underperforming DM equity markets.

I wonder whatever happened to Jeffrey Currie!

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