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The VIX Breaks
The VIX just went parabolic
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so did oil
Yup, what happened?
long vol fund painting the tape for month end i suspect
Essentially VIX is off record highs of late '08 and trending lower indicating a macro sedation of the U.S. herd, but an intraday spike of this volume is 1. significant for day traders 2. indicative of a potential CIS (change in sentiment, just made that up)? TD (and friends) Does the equally volatile dip earlier today mean anything more than the market swung +/-100 points in the first hour of trading?
End of month craziness. Even LQD, interesting.
30 year T Bond power surge, is that a get the hell out of stocks message?
I shorted the stock market
So did I! Next week down.
human breech!
Get out before FDIC Failure Friday?
No matter how many times I post this, I just can seem to get anyone on this site to tell me what is wrong with the
1. methodology
2. data
of ECRI. If ECRI is just b.s., it's certainly worth pointing out in detail. Their predictions get a hell of a lot more publicity than Zero. So please, not just whining: DETAIL.
NEW YORK (Reuters) - A measure of future U.S. economic growth climbed higher in the latest week while its yearly growth rate hit a fresh five-year high, signaling a stronger recovery than originally forecast, a research group said on Friday.
The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index rose to 119.6 in the week ended July 24 from a downwardly revised 118.3 the previous week, which was originally reported at 118.4.
The index's annualized growth rate continued to soar, reaching a new five-year high of 8.8 percent from 7.7 percent the prior week.
It was the highest yearly growth reading since the week to October 3, 2008 when it was 8.9 percent.
ECRI Managing Director Lakshman Achuthan has said the recession is already beginning to wane, and that increased stimulus from Washington is not necessary for economic growth.
"Not only is the U.S. recession set to end this summer, but the recovery is apt to be stronger than many expect."
The weekly index rose in the latest week due to firmer housing activity, said Achuthan.
due to firmer housing activity??
Foreclosures up again
http://blogs.reuters.com/rolfe-winkler/2009/07/30/1-of-84-us-homes-recei...
Maybe you can't get a detailed reply because this is bullcrap. What "Leading Index"? I have not seen "growth numbers" anywhere in purchasing manager's index or anything else. Industrial production? What?? Are they counting new iPhones?
The last sentence is the biggest fallacy: "firmer housing activity". That would only be a positive thing if housing prices weren't continuing to fall and higher priced homes were selling. Neither is happening.
No one will respond because any hint of a true recovery is bullshit. What are they gonna drop fucking pixie dust on the employment situation and put everyone back to work? Is some freaking magical troll gonna come and restore the RE and CRE market back to normal? Is the credit fairy gonna come and re inflate the fantasy driven credit bubble? WTF dude of dudess? Are the gods going to just wipe away the trillion dollar deficit (well, that might happen in the impending bank holiday). I could go on and on and on and on. You gotta wake the fuck up in my humble opinion. These are real problems. Sure, you are allowed your view and for the sake of all our asses I hope like hell you are right, but in the real world stocking up on ammo might not be a bad idea. Do you read ANYTHING that TD and the ZH team posts? Do you understand anything they post? Are you a CNBC addict? Please reconsider your post and thinking. Things are MUCH worse than they appear.
Atta boy Shankster
Just curious. Are you long or short FPD (fucking pixie dust). It seems, on the surface, like a good long play but then you stop and think about it and realize a lot of it has been sprinkled on a lot of things and maybe demand's about to fall off a cliff. I don't know. I can't even figure out what exchange it's traded on, but I want some action.
ROFLMFAO
On the weekends, Goldman Sachs employees kill puppies with claw hammers.
Nah. Those fuckers use chainsaws.
And kittens aren't spared either...
Follow the money. Who pays their bills ? It may explain their take on things. GS, JPM , et al ??
ok...this is an index of leading indicators as
far as i can tell....as such it is only a
predictor - not a statement of current economic
activity.....what is it's lead time for indicating
growth in gdp?
i do not know the components of this index so
cannot speak about its validity nor do i know
anything about its past performance so cannot
speak to its reliability.....if you have that
information then please provide...
gdp numbers today were aweful and propped up
heavily by massive government spending of fiat
dollars which have to be repaid....if you back
out government spending of fiat dollars which
represents more pulled forward demand then you
will note that gdp continued to contract at the
5-7% rate it has contracted since 4q08....
i am not seeing green shoots in this index....
please go to market ticker blog for today
to see an explanation
of the latest gdp numbers....
gnp i suspect has contracted even more sharply...
it is this number which tells the full economic
situation and it too is manipulated like a sock
puppet....
1st quarter gdp was revised downard sharply....
see the end of the end of the recession post
on this website for a full bodied view of the
state of the economy....it seems so bad that
any forward looking index with much optimism
would have to be very far looking....
the bea's own number make it impossible for gdp
to turn positive this quarter or next....
someone needs to tell those folks to put away
the green spray paint.....
Of course it is getting a lot of publicity. It's a report that is stating the recession is ending/over and that great times are on the horizon. So this report must be pumped all throughout the media. Unfortunately, I do not subscribe to ECRI so I don't know what the exact details of their leading indicator are. They could be like the Conference Board's indicator where it's pretty useless because they revise their methodology to better fit the data. Or it could be the data they are using may be slightly flawed now, such as the better housing data (which now can be seasonal disruptions, higher priced homes being forced to sell, foreclosure moratoriums, etc.) However, it doesn't look like it actually "leads" the stock market by anything more than a month. Looks more coincident (Stocks were up 35%+ and we were still in a recession through June.) And if it leads GDP, I can understand that because with all the government spending, miraculous strong net exports, the possiblilty of slower inventory drawdowns, and now possibly higher consumer spending and a production pickup related to the Cash for Clunkers expansion, don't be shocked to see a be string theory snap back in Q3 and maybe Q4 GDP. But until employment and savings pick up, I wouldn't follow these "green shoots". Maybe get a double dip like the 80s or this is just a big bear market rally like the 30s or Japan the last 20 years.
It's composed of:
Money Supply
Stock Prices
Commodity Prices
Mortgage Apps
Corporate Spreads
Treasury Yields
Jobless Claims
ECRI does good work, but it's all based on prior cycles.
In the current cycle, only 2 of those inputs haven't been
artificially supported (mortgage apps & jobless claims)
and they still suck. The surge in monetary growth alone
is enough to turn the index positive. Economic growth has
improved, but the sustainability is doubtful.
of course ECRI is positive because stock market is a component of it, how could it not be positive after a 50% rally
however pump and a future dump does nothing to the real economy.
trying to make people continue indebted spending by creating an illusion of "good times are back". Göbbels would be proud.
Thanks. This is actually helpful, and doesn't involve screaming. Supposedly, ECRI has accurately predicted every economic cycle except one: the Great Depression.
Nevertheless, if they are a shill, shouldn't someone be on their case more?
and that is the only economic period to which you can compare the current situation. these "leading indicators" worked in prior periods b/c credit expansion would fuel lending, which drove productive investment, which increased prosperity.
Unfortunately we've blurred the definitions of "productive investment" and "spending" and assumed they could be one in the same. there is a diminishing multiplier from spending.
sustainable bull markets occur as a result of productive investments, of which the universe is limited.
the point about diminishing multiplier to
spending is more important than you may think....
marginal productivity of debt has been declining
steadily since the 1950s....some sources show
it being negative while others show it being
slightly positive still....at best the speding
will have little durable effect and at worse will
gdp to decline in future quarters.....it will
most assuredly cause a decline in gnp....
you're welcome. And again, they do good work, but only if
you believe this cycle is like all the others, and that
the input variables have not been tainted. They do have a
decent record...but not quite as perfect as they let on.
and to be anal (but rightly so) what is the
weighting of each component?
this is the most bogus economic indicator in
the world....
each of these series has huge problems as relates
to gdp..
1. money supply - can be inflated at the drop
of a hat and has no relationship with real
gdp
2.stock prices as a leading indicator have about
a .50 correlation coefficient between djia and
real gdp
3. commodity prices have no correlation with
gdp
4. mortgage apps are meaningless - it doesn't
measure follow through....with housing prices
falling i suspect that gdp would fall in concert
regardless of how many people apply for a mortgage
5. corporate spreads - no comment
6. q yr treasury yields and real gdp correlate at
about -.18 since 1980 on a 1 year leading basis....
this is next to worthless as an indicator
7. jobless claims are bogus because it only
measures a rate of change rather than an improvement
in employment....rate of change - i.e. new claims
could drop to zero but unemployment could remain
structurally high for a long time....depending
upon who is unemployed, structural unemployment
could be far more indicative of future gdp than
initial jobless claims....additionally, the fed
has stated recently that there will be no new
net job growth for 5 years.....
i am open to informed and intelligent crtiques
but this index is a crock of shit regarding
gdp....weighting could make it even more useless....
I don't know the weights, just components. But having built
many over they years, I'm safe in saying they are weighted and it's the weights that are adjusted over time (tweaked).
1. Real MZM does a decent 9 month lead (current reading - useless).
2. Stock prices are okay 6 month lead (don't underestimate the power of a few 50% corr. variables that lead).
3. Commodity prices are mostly useless except lumber.
4. Apps are useless
5. Spreads are pretty decent
6. Treasury Term Spreads and Yield Rate-of-Change are use-
ful.
7. I am not a fan of jobless claims
again, these are all decent factors, but only based on
PRIOR cycles. For the most part, they are all being
artificially determined at the margin = of very limited
value in the current cycle.
treasury spread (1 yr vs 20 yr) at a 1 year lag
correlates at about .3 since 1970....
rate of change on yield since 1960 on
a 1 year lag correlates
at about -.18....seems weak to me....
i know that time frame can be critical but
from a big picture back of napkin perspective
i am not seeing this index as being a strong
tool.....as such i discount it viewed in
isolation of other data.
what happened to being open? (just kidding) What term
Treasury did you use for the rate of change? Try a global
average of 3 month LIBOR. And have a good weekend.
Leading indicators?
Money Supply (manipulated by Fed)
Stock Prices (manipulated by GS and CNBC?)
Commodity Prices (anyone thing oil prices currently have any connection with demand?)
Mortgage Apps (manipulated low mortgage rates)
Corporate Spreads (manipluated by Fed programs)
Treasury Yields (manipulated by FEd QE)
Jobless Claims
to quantify my comment about money supply
growth (m3) and gdp as leading indicator the
correlation between the two on a 1 year leading
basis is .20 - immaterial.
I was going to write almost exactly this. ECRI is actually pretty damn good - they've been one of my best guides, even calling the recession well prior to anyone else...and pointing out its causes.
However, they are objective in nature, not subjective. Thus, the information they provide is generally accurate - they don't make judgements about it or adjust it substantially. As a result, even if the information is jobbed because of government spending, it's going to look good. They will probably agree with most of what has been written here - it's been supported with government spending and fiat money.
To them, it doesn't matter. Which is why they made a "warning" of sorts - the recovery will be stronger than expected. Well, of course it will because inflation is going to force the growth to be incredibly rapid.
Now ECRI isn't showing inflation and there's no surprise here. After all, deflationary pressures around the world are in existence. But not in the US, with the massive money pump taking place. Even Weimar Germany saw low inflation the first 2 years....but years 3 through 7 were awful. By year 5, the economy was in tatters.
I love this quote from the ECRI site:
The Economic Cycle Research Institute, a "New York-based independent forecasting group"
Right. Independent.
And Obama is Santa Claus in a Dirndl serving beer.
Propaganda machine is working overtime. It just might work or it might not. It didn't work for the Russians during the Soviet Union. Pravda declared each day was better than the day before. Everything was great and people were happy. Skies always blue and so on.
Reality had people lining up for basic goods and items.
People wanting other currencies than their own and people basically distrusting their government and all establishment until the fantasy nightmare collapsed.
http://www.briefing.com/Investor/Public/Calendars/EconomicReleases/leade...
This is why this doesn't matter. Yes it did signal the end of the 01-03 recession like the self-proclaimed heros of it always say it does. But it did so 2 years in advance, meanwhile people continued to get raped in the stock market. I could signal almost any recession as ending two years in advance because most recessions are less than two years long. Notice it also peaked in 2003, while the market continued to climb until 2007. Use charts, they tell much more than these indexes based on fudged statistics and archaic measures.
This article about the ECRI leading index seems muddled to me. Am I missing something or do these numbers make sense?
"...a new five-year high of 8.8 percent...It was the highest yearly growth reading since the week to October 3, 2008 when it was 8.9 percent."
So the five-year high was really 8.9 percent on Oct 3, 2008. And how can this be a realiable leading indicator of future economic growth? Where was the growth following the high reading in Oct 2008???
(Just got home from pub so maybe I'm confused)
21118 - no one will respond because the ECRI indicators are "proprietary", so they wont tell anyone what they are using. However, the chances are this LEI is geared towards predicting business cycles (in the same way the govt's own LEI is done). These guys could be using a fall in continuing claims, for instance, as an indicator that the recession is "easing".
you know, i know, we all know that this isnt the case. LEI are geared towards inventory cycles. Very good odds this one is no different, no matter how smug MD Lakshman is. This is another case of intelligent people being too stupid to realize what is going on outside of their models.
Japan and Euro zone are already in deflations. Our PCE deflator barely came positive.
We have a long way down to go. Its not a matter of "if", but "when the stop propping it."
It was the highest yearly growth reading since the week to October 3, 2008 when it was 8.9 percent.
As I recall October 2008 was not the start of any economic recovery.
We are getting so close MY BALLS ARE TINGLING!!!
dude - best comment of the day! LOL...
I don' t know if it's a reliable indicator. Were they tingling last September?
Uncle Ben & Pump & Dumpers coming to examine that you're not hiding any cash from mandatory consumption!
http://www.youtube.com/watch?v=CGRu4dJykAQ&fmt=18
did i win?
Yes the 2007 and 2008 numbers according to Bloomberg are twice as bad as previously reported. The GDP numbers today were better than expected however they brought the number down a full percent from the previous quarter. So there is a positive bias to all short term reporting of financial news and after several quarters have passed they correct them, downward. come on people smell the koolaid before you drink it.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aNivTjr852TI
Actually the VIX spiking at days end after this huge up move is in my opinion bullish. Put it this way, if you are an institution and decide to pay a premium to protect your position's gains, are you going to necessarily rush to the exit when everyone is? No you will be more deliberate and that in turn helps the market maintain much more composure.
What worries me more is a complacent (lack of fear) market. That is what turns markets nasty...On a pullback if institutions are underprotected, sell programs kick in and you have a stampede out the door. Guess who gets out first? ...(the likes of GS)
a rising market and rising (not spiking) VIX is much healthier than the alternative, a rising market and a complacent VIX.
Hey Income Trader, tell that to all those that had "portfolio insurance" before the '87 crash. When everyone has a nice sensible hedge we all lose. Once markets break a certain level the downward spiral feeds off itself, liquidity dries up, prices plummet, discount buyers don't even want to buy in for fear that things will keep dropping so they stay on the sidelines so liquidity further suffers, so prices drop further to lure in buyers, etc. All the while funds are selling all the way down to desperately try to hedge becasye hedges are dynamic. It doesn't matter if they are well protected now. If they have to move their hedge to stay protected and everyone else is doing that at the same time everyone is going to be chasing that carrot on a stick right off a cliff.
<img src="http://gobumori.la.coocan.jp/blog/06121-vicks.jpg">
I have no idea why Vicks is going up, I guess shit is just more expensive.
Roseanna Roseannadanna couldn't have said it better.
Vicks is going up because he just got out of prison, I too am trying to determine exactly why VIX went up.
I like it! LOL
Tyler , youre officially losing it. Im a stubborn bear but you take the biscuit. The VIX just moved from 25.20 to 25.70 at the close and thats parabolic? Dude. Seriously.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aUKAk1bKBVl8
From the link:
"Rising delinquencies among consumer and corporate borrowers are the “next wave” of the financial crisis and may affect banks that have avoided losses so far, said Deutsche Bank AG Chief Executive Officer Josef Ackermann."
This guy has definitely not been paying attention. Here's the way it goes:
1. Rising delinquencies
2. Leading to bad loans
3. Leading to systemic risk
4. Leading to a taxpayer bailout
5. Leading to bonuses for key team members
Geez, how do you get to the top of an organization as large as DB and not understand that?
more like 25 to over 26 in less than 30 minutes. if it did that over the course of the day, BFD. 30 minutes near the close of a week and month, means someone is frantically buying spx options and can't wait until monday.
not bullish, not bearish. just something. couldve been someone that just "omg wtf i haz to get in>!>!!!!211" and bought up a metric shitton of calls for a rip roaring freshmoney 401k allocation Monday.
There have been three down 1% (2 recovery) moves in the day, that is why it is called the volatility index and that is why the VIX has finally moved. Expect more. August third is the last bond sale for a while and central government goes on hols. Then the banks will really goto town!
Vix? Whatever, I hate looking at that fuckin thing.
Now, today's action in the 30 yr ........
Tried to short F,T,JPM,AXP,HIG at the VIX spike but none are available. May be big boys already shorted (Read Govt sachs)
You're saying they were impossible to borrow?
Lagging indicator. I always insure my weekend.
Good series of posts here - excellent comments and some great humor.
On the VIX - the value of this one indicator is both overstated and misunderstood by the market. It does NOT always correlate to the market over days or even weeks. And in some years - especially in periods of economic recovery - its correlation can drop to below -0.50. With the recent enthusiastic noises about recovery (yeah, tough to swallow) it is not surprising that the VIX has become decoupled from the market. It will most likely continue to run this way for some time. Only a sharp shock will whack the VIX back into line as a negatively correlated indicator to the market. If you take a position either way on this point there are ETFs available that track the VIX. Just remember that the VIX is a function of options pricing - it is not engineered to be a leveraged short position. And, as TD rightly and continually highlights, it is not always tied directly to the tick by tick moves of the futures or cash S&P.
On ECRI - I know the guys there. They are honest and call em as they see em. Now, onto their models. The comments made earlier are very accurate. They are based on prior cycles. As the current environment has no precedents you need to take their thoughts very very cautiously. And no, they were not calling for a recession two to three years ago. Most emphatically not.
"As the current environment has no precedents..."
There are three: the Great Depression, Japan in the 1990s - 2003(ish) and USA +RoW 2007 on...they are all unusual Balance Sheet Recessions according to Richard C. Koo of Nomura Research Institute. Characterised by the bursting of a bubble and then de-leveraging to repair balance sheets...personal and corporate. Low interest rates, fear of debt, monetary policy ineffective but fiscal policy the key.
He has an interesting book written Feb 2008, modestly titled "The Holy Grail of Macro Economics", "Lessons From Japan's Great Recession" (John Wiley & Sons Asia Pte Ltd).
I can't fault it.
Either tells you a lot about him...or me.
Good luck.
Sorry, and No. 3 Germany from 2000 something to 2005 after the IT (Telecoms) bubble burst there...
Good luck
they said on Bloomberg radio today that without the stimulus the number would be like minus 4 or 5 for GDP. So what happens when stimulus over?
The answer is not to turn off the fiscal stimulus tap too early.
USA tanked in 1937 when they reduced the stimulus...things only turned around after 1945....sobering thought. I think the 1945 deficit was 37% of GDP.
Japan tanked in 1997 when they reduced the stimulus...re-applied it and maintained GDP at pre-bubble levels until abt 2003 when coorporate borrowing started to increase again...Japan Gov't debt is now abt 200% of GDP so I guess Japan might be the one to watch to see the real answer to your question.
The idea is that the Gov't stimulus replaces corporate and personal expenditure (as they are solely focused on solvency after the bursting of the bubble) and then eases back when private sector borrowings start to increase. Took Japan best part of 15 years in a booming export economy.
It also requires faith in Gov't solvency to be maintained.
Good luck.
Context for the VIX is important to keep in mind. After a rally such as this where there may be quite well founded incredulity - there is a certain fact among managers that they are expected to catch both up and down moves. Insurance is as cheap as we have in seen in a year. If bidding up some puts on the last day of the month or spiking the VIX is a result I am not surprised.
Context for the VIX is important to keep in mind. After a rally such as this where there may be quite well founded incredulity - there is a certain fact among managers that they are expected to catch both up and down moves. Insurance is as cheap as we have in seen in a year. If bidding up some puts on the last day of the month or spiking the VIX is a result I am not surprised.
Let's just go ahead and short the human species...It's going to be fugly for a while.
These things happen when your financial market makers can transfrom themselves into a car theft ring overnight (at least Wall Street was smart enough to buy both sides of the political aisle, now that's investing in America).
Okay, time to do something else...But I have this awesome vision playing over and over in my head...Rush Limbaugh driving off a cliff (in a brand new Chevy) with Ron Gettlefinger in the trunk.
Goldman is going to squeeze the living daylights out of every unbeliever. They have done it before and they will do it again.
Right now due to the seemingly crazy market running up at break neck speed like moths to a flame billions are being lost by shorts nearly every day...
Goldman is going to take that money and flaunt it in the bright light of day as it is become the savior machine of the investment brotherhood for once again all eternity.
For decades to come they will all speak of Goldman as the hero of the "great recession".
Those who remain short will come to know its power once again. If you are a short for your own sake they batter ALL be long term shorts 1-2 years and you better be prepared to wait that long to truely cash in. In the meantime expect the most vicous short squeeze ever know to man.
Goldman is going to squeeze the living daylights out of every unbeliever. They have done it before and they will do it again.
Right now due to the seemingly crazy market running up at break neck speed like moths to a flame billions are being lost by shorts nearly every day...
Goldman is going to take that money and flaunt it in the bright light of day as it is become the savior machine of the investment brotherhood for once again all eternity.
For decades to come they will all speak of Goldman as the hero of the "great recession".
Those who remain short will come to know its power once again. If you are a short for your own sake they batter ALL be long term shorts 1-2 years and you better be prepared to wait that long to truely cash in. In the meantime expect the most vicous short squeeze ever know to man.
Goldman is going to squeeze the living daylights out of every unbeliever. They have done it before and they will do it again.
Right now due to the seemingly crazy market running up at break neck speed like moths to a flame billions are being lost by shorts nearly every day...
Goldman is going to take that money and flaunt it in the bright light of day as it is become the savior machine of the investment brotherhood for once again all eternity.
For decades to come they will all speak of Goldman as the hero of the "great recession".
Those who remain short will come to know its power once again. If you are a short for your own sake they batter ALL be long term shorts 1-2 years and you better be prepared to wait that long to truely cash in. In the meantime expect the most vicous short squeeze ever know to man.