VIX Hits Lowest Level Since April

VIX Hits Lowest Level Since April

Fear has left the building – again.

Yesterday the VIX hit its lowest point since April…

VIX chart October 2010


Which is potentially ominous, because you remember what happened next.

But, hey, I’ve been writing about an imminent dollar rally/stock market collapse for months now, so what do I know!

At least I’ve got formidable company – Jeff Clark agrees:

Volatility has collapsed.

The Volatility Index (VIX) – the market’s best measure of investor fear – is now trading below where it was just before the flash crash.

Am I the only one who’s scared to death?

The economy stinks. The mortgage market is riddled with fraud. Banks aren’t lending money to anyone. And taxes are going up.

Yet, the stock market is partying like there isn’t a care in the world.

Of course, I understand the bullish argument. If the economy strengthens, stocks will go up. And if the economy doesn’t improve, the Fed will print enough money to force stocks higher.

Is it really that simple?

Somehow, I doubt it. After all, Internet stocks could only go higher in 2000. And real estate only goes up. Right?

Pardon me if I don’t believe all of the world’s problems can be solved by central banks printing money.

You can read Clark’s full piece here.

I concur with his point that it can’t be that easy.  The “heads we win, tails we get QE” argument strikes me as the kind of can’t lose trade that inevitably goes awry.

Well, we shall see – perhaps as early as tomorrow, when Bernanke speaks.  And probably by November, when QE plans (or lack thereof) are announced.

Also see: How the VIX historically has forecasted stock prices.