Pogaduchy przy porannej kawie

[daromanchester]

21 Aug 2012 - 13:00
(James Saft is a Reuters columnist. The opinions expressed are his own) By James Saft Aug 21 (Reuters) – To understand why financial market volatility is so low, it helps to remember that other volatility miracle of recent years, the Great Moderation. Despite Europe, despite the fiscal cliff, despite the upcoming U.S. elections the VIX, the so-called fear index, hit its lowest levels on Friday since before the financial crisis began in 2007. The VIX, which gauges investor perceptions of how jumpy trading in the S&P 500 will be in the coming month, hit 14.25 and has nearly halved since June. Given how uncertain so many things are currently, and given how financial markets usually react to uncertainty and surprise with volatility, that’s an astounding fall, something which could, on face value, look reassuring, a new Great Moderation but this time in financial markets. The Great Moderation was the name economists gave to a period starting roughly in the mid-1980s and ending, quite roughly, in 2007, in which the laws of the business cycle seemed to have been relaxed, if not abolished outright. Rather than alternating between periods of rapid expansion and contraction, GDP growth in the industrialized economies moderated in pattern, to everyone’s great relief and self-satisfaction. The idea of the Great Moderation is now an anachronism, a bit like the War to End All Wars, but at any rate we believed it for a while, and more importantly behaved as if it were true. This helped the idea to become a self-sustaining, if time-limited, phenomena; Households and businesses took on more risk, and more debt, because they were less fearful of being caught short in a violent recession or financial crisis. During the period the credit for the new era was generally given to central banks, many of whom were given new independence from political control. The idea was that technocrats had finally cracked it, and if left to manage the economy, could lead us into a new world in which recessions would be few and short and depressions unknown. Perhaps the high point of this millennial thinking was a 2003 lecture to the America Economic Association by Nobelist Robert Lucas in which he declared: “Macroeconomics in this original sense has succeeded: Its central problem of depression-prevention has been solved for all practical purposes, and has in fact been solved for many decades.” ASSYMETRIC POLICY AND THE VIX That was all poppycock, of course. While policy-makers were instrumental in the Great Moderation, it was as enablers of dubious risk-taking. The Federal Reserve was the leading practitioner, easing policy when financial markets became jittery or the economy stalled, but failing to remove the punch bowl during what were self-evident bubbles. The underlying reality of the Great Moderation was that it was driven by a massive build-up of debt, which did indeed help to smooth growth and consumption but which built up in its wake huge risks. As we saw in 2007 and 2008 economic volatility, a bit like energy, cannot be destroyed, only switched from one form to another. So what does all this have to do with the Vix, and with that lovely sipping cool drinks on the beach while our stocks rise in value feeling so many of us have? The fall in the VIX comes from the very same locus as the rise of the Great Moderation, and therefore must have a real risk of meeting the very same type of outcome. Financial markets are not calm, or returned to normal; they have been pacified with the very same central bank medicine, though with slightly different delivery systems, as was the global economy up until 2006. The VIX is low because belief in extraordinary monetary policy, in the near future, is high. Debt in the global economy has only gone up, though more of it is on government balance sheets than before. Governments and central banks are absorbing and issuing debt in an attempt, partly successful, to blunt the impact of the Great Moderation-induced quasi-depression. It is, of course, possible that what we are witnessing is simply the result of the socialization of private risk taking. Leverage has come out of the financial system as a direct result of the crisis, and so perhaps the reaction to future instability will be less. That logic only holds, however, for as long as governments can successfully continue to absorb, and issue, debt. If that comes into question, for whatever reason, the volatility will be back and much bigger than what we’ve seen before, both in market and economic terms. We may be a long way away from that, and the time of worry-free speculation may continue, but it’s important to remember that even governments can’t absorb unlimited risk. At some point the suppressed energy of volatility will come out. (At the time of publication James Saft did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. You can email him at jamessaft@jamessaft.com and find more columns athttp://blogs.reuters.com/james-saft) Keywords: COLUMN MARKETS/SAFT

W piątek 259 wspominał o Vix'ie

[Esco]

AUSTRALIA AT RISK OF RECESSION
Deutsche Bank warns against the growing risk of recession in Australia in 2013, as prices for key commodities such as iron ore and coal spiral lower.

http://online.wsj.com/article/SB1000087 ... lenews_wsj

[259]

Tak, wspominałem o VIXie. Właśnie w takim kontekście ;-)

[niemiaszek]

RISK: The CBOE's volatility index or VIX stands at 14.57, after
trading in a 13.46 to 14.61 range. The index posted a low of 13.30
Friday (13.38 Monday), the lowest levels seen since June 19 2007 (12.85
close, 12.79 low that day).

[Esco]

US TSYS/STOCKS: Traders cited a big midday asset allocation trade
that boosted Tsys off the lows: was midday selling of S&P Eminis/vs.
buying of Tsy 10Y futures. Speculation has it, that was a fund or some
big endowment doing such trade. "Everybody was leaning the other way,"
sighed one trader, thus got hurt amid such trade.

[259]

Americans Hitting The Road For Long Weekend
By Adam Button || August 21, 2012 at 17:41 GMT

MNI is carrying a survey from AAA that shows Americans planning to travel +50 miles on Labor Day weekend are at the highest since 2007.
That’s either a sign that sentiment is improving (despite high gas prices) or a sign that the kids haven’t visited Grandma and Grandpa in 5 years

Risk on, risk on...

[Esco]

Odpuszczą 1.1900?

[259]

Chyba nie odpuszczą.
RBA przyznało, że głównym źródłem siły A$ był SNB upychający im w ten sposób nadwyżki Euro.
Ale teraz SNB może wypychać Euro bezpośrednio przez USD wykorzystując siłę Euro jak i jednoczesne osłabienie Dolara. No może nie tyle ile by chciał ale to zawsze ulga.
Tak więc ciśnienie na EURAUD spadło, a i sam A$ dostał zadyszki.

[Esco]

RISK: Financial market players have entered the Twilight
Zone and find themselves in a "fifth dimension beyond that which is
known to man," one where the eurozone crisis may finally be contained.
After months of dashed hopes and false starts, the market has
decided this time is different and that the European Central Bank is
truly determined to take action to lower peripheral borrowing costs.
If true, then positioning for the fall of 2012 will require 'out of
the box' thinking to imagine an economic landscape without European
issues hanging like a 'Sword of Damocles' above the market's head.

[259]

Today’s close will be bullish; tomorrow more important
By Jamie Coleman || August 21, 2012 at 19:27 GMT

Many of the macro guys with deep pockets wait a day or two to get confirmation of a reversal before pulling the trigger on covering a short. If we’re still up here late in tomorrow’s London trade session we could see another wave of buying, and most likely the buying won’t correspond with anything crossing the tape, making it hard to identify.

Remember this if we shoot higher between 14:00 and 16:00 GMT tomorrow.

http://www.forexlive.com/blog/2012/08/2 ... important/