Confirmation bias alone isn’t enough to explain this market. You also have to add in a healthy dose of irrational optimism with respect to the prospects for future earnings and several flavors of personality disorder. It is almost as if the market is lulled (if you can call 60-70% implied volatility in index options ‘lulled’) into some conviction that this is the ground state, only to find, at some date in future, that the market is nestled in a false vacuum. Throw enough energy into it the right way, and you’re in for a nice bit of vacuum decay.
The market has absorbed so much marginal news as “cause” for celebration, relief and joy (today’s housing stats for instance) in the face of darker and more imposing clouds no longer hidden over the horizon, that it just doesn’t seem prepared to endure much in the way of a shock. A loud enough sneeze is enough to twitterpate this market beyond all hope of immediate repair.
That said, a slow climb by the indexes today followed by the now trademarked plunge before the close (sometimes with a last-second recovery, sometimes not so much) just tells you buying on the dips is like building on mud.
The VIX, a vastly overused and yet misunderstood metric, has been pegged to “record highs” (whatever that means for an index that hasn’t been around for even two decades yet) for days now. And maybe it’s just me, but backdating VIX calculations just rubs me the wrong way.
In these circumstances, it seems almost useless to comment that the S&P 500 closed down over 3%. That the Dow was down to 8176. It seems more interesting to point out that the S&P 500 traded in an 5.5% range. The Dow across a similar spread.
Sure, your mom will call you tonight and tell you that she’s been watching CNBC to “keep abreast of the markets” in the face of the “chaos.” Yes, you’ll just have to cope while she tells you what the VIX is (“the ‘Fear Factor.,’” she heard Cody talking about it, you know. She always watches Fox Business now. “Just in case.”) That’s the price you pay for taking her money to go to B-School. You’ve got to listen to her when it comes to Fox Business.
Take heart. In this market she knows as much as anyone. Including, Cody on Fox Business. Seriously.
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wait – if nobody knows anything – what’s the point of this post?
Too homesick for mom’s cooking; didn’t read.
EP, I’d love to rub you the right way.
Sorry Bess, it’s over.
@3- she must be heartbroken.
This post takes seven paragraphs to say absolutely nothing. Slathered with a smug pessimism though, nice work!
Worthy of Dennis Miller
It was a dark and stormy night…
Just EP trying to overcompensate for not getting in to Stanford
When your mom stops watching we will have a bottom.
cody/happy hour = unmitigated disaster.
Not that CNBC has been fantastic by any stretch of the imagination – trying to address 2 vastly different audiences simultaneously doesn’t help – but that fbn crap is mind-bogglingly horrid.
Was @ a wedding down in Ft. Lauderdale this weekend, and people with relatively zero connection/experience in Finance were blabbering on like they know wtf is going on. If that’s any indication, we’ve got a long ways down to go…
Nucleation – - love it
Love Cody!!!
Is it time to change your name to “Equity Death-of”?
I think that the Fed or TTSY have been in the equity markets trying to prevent a “crash.”
Wasn’t there talk of the TTSY buying equity futures?
I bet they have been.
Haven’t heard the name Cody around here for a while.
Not sure what this was about? EP’s mom?
Sigh, the vigorous discussions with mom about Wall St. More to come this Thanksgiving.
@4 She’s not. She has SPODE.
It appears to be a thinly disguised knock at all things Fox news, particularly the business channel. Puzzled why CNBC wasn’t considered for the same type of knock. Only conclusion one can draw is that fox news and their “fair and balanced” approach aren’t palatable to you and you prefer the “in the tank for BO approach much better”.
If it isn’t this, then you have knocked all good parents who have sacrificed to pay for their progeny’s business school and you are a total spoiled brat.
is this dealbreaker or the economist? my eyes is going crazy over here…
Equity Private do have any idea how the VIX is calculated?
Implied volatility is a violation of black scholes and therefore self contradictory. The VIX is for tourists. Watch it at your own peril.
Fade the Skew, hedge the gamma.
- VOL IS KING
You mean to tell me that Americans are hopelessly optimistic? And not rational? This is just more unpatriotic media negativism which is what caused the markets to collapse.
we have one more support level remaining, it’s over on a failed close.
http://www.weeklyta.blogspot.com
@21 = Voodoo
@4 and @16
Do we know for certain EP is a chick?
Equity Private
Not Funny
“October 27, 2008, 3:14 pm
Of Copyright & Family Feuds: “Hedge Fund Wives” Goes to Court
Posted by Dan Slater
The pending publication of a novel called “Hedge Fund Wives” has led to what appears to be the makings of rather nasty court battle between the Boncompagni sisters.
Tatiana Boncompagni Hoover is married to Max Hoover, heir to the vacuum fortune. She has written freelance articles for the The Wall Street Journal, worked as a staff reporter for the American Lawyer, and last year she published her first novel, “Gilding Lilly” (HarperCollins). Natasha Boncompagni, according to this copyright suit, filed today by Tatiana, lives in Wisconsin with her parents and grandmother. An online bio says Natasha is a Wall Street veteran whose career began in UBS’ investment bank.
According to her lawsuit, around the time Tatiana began writing “Hedge Fund Wives” last year her sister “offered research assistance and to share her own past experiences in the financial industry for a $500 fee.” Though Tatiana declined, Natasha “occasionally provided ideas relating” to the book.”
http://blogs.wsj.com/law/2008/10/27/of-copyright-family-feuds-hedge-fund-wives-goes-to-court/
“Cost of crash: $2,800,000,000,000″
http://www.guardian.co.uk/business/2008/oct/28/economics-credit-crunch-bank-england
via matt drudge
LONG VIX SHORT EP
EP you communist. I can’t even read your shit anymore. Can we get an RSS feed without your posts in it?
Who has blown up among banks and hedge funds in carry trades? There must be fire, because there is smoke: FX intervention! Details below:
http://www.marketwarnings.com/2008/10/forex-currency-yen-intervention-japan.html
im so happy i became a broker now…watching all you analyst fucks ruin it and then get fired for it…ill keep producing my 2mm dollars for the year, managing ETFs and mutual funds. haha!
EP, I used to love Going Private… you haven’t updated that since forever. At least there I didnt have to put up with these crap-DB-tards (the commenters, not your colleagues).
Please go back
@ 19
black scholes is BS
try to come to terms with that
also bite me
@32
uh, yes, that was the point of the statement.
@32
black-scholes is BS so therefore the VIX is BS and the skew is BS
How do you argue that implied vol contradicts black-scholes? It’s just a simplified input into the calc that’s supposed to account for skew and anything else about the vol surface…
uh because options on the same underlying assume different standard deviation for said underlying when it can only have one standard deviation and black scholes says all the options must use that same standard deviation, NOT DIFFERENT ONES.
now black-scholes doesn’t work, but if you adjust the standard deviation assumption of the model its meaningless anyway so why bother using it. And if you’re not using it then the term “implied volatility” doesn’t really make very much sense now does it?
Implied? implied by what, the model that you’re not using?
Moronic.
NEXT.
@31–Agreed. EP was often funny on GP. It was a good read.
EP, at least let us know what the Debt Bitch is up to these days.
I have been reading DB on and off for a year and think it’s great. I have stepped it up over the past couple months b/c Bess has been all over the rumors that are driving markets. But this Equity Private stuff is ridiculous. Try using about 1/3 of the space to say what you’re trying to say. It’s getting to the point where as soon as I see the byline, i’m scrolling down until i see the next column by Bess.