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The Last 3 Times This Happened, Markets Turmoiled

Tyler Durden's picture




 

Thanks to Bob "I don't get out of bed unless it's over 20" Pisani's daily diatribes about VIX (the so-called 'fear' index), we are supposed to rest assured that all is well in the ever-decreasing horizon world of equity markets. However, while VIX measures the expectations of 'normal' day to day moves in stocks, it does not offer any insight into market participants' perspectives on tail risks (or 'the big one'). CBOE's SKEW index does just that, based on the pricing differences between normal and fat-tail risk pricing in the options market, it provides a measure of the market's belief in extreme events... and for only the 4th time in history, it's flashing a big red warning signal of volatility ahead.

The last 3 times this happened... markets went a little crazy...

 

In 24 years of history, SKEW has been above 140 only 4 times (including the current)... the last 3 times were...

  • 06/21/1990 - S&L Crisis (Stocks dropped 18% in next 3 months and the US entered recession)
  • 10/16/1998 - Russian Default and LTCM (Stocks soared 22% in the next 3 months and the dot-com bubble was born)
  • 03/16/2006 - Housing Bubble peak (Stock dropped 6% in next 3 months and the 'great recession' started within a year)

And now?

  • 12/20/2013... Taper...

 

Chart: Bloomberg

 

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Sat, 12/21/2013 - 19:15 | 4267180 Sudden Debt
Sudden Debt's picture

so let's wait 2 more years to short the market... I'll put it in my agenda...

Sat, 12/21/2013 - 19:18 | 4267187 flacon
flacon's picture

"This time it's different" because "Stock prices have reached what looks like a permanently high plateau".

Sat, 12/21/2013 - 20:02 | 4267241 Chris Jusset
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Please note that markets cannot tumble or enter a state of turmoil AS LONG AS THE FED IS MAINTAINING MASSIVE LIFE SUPPORT; currently, we've had 5 years of ZIRP and QE, and as long as this continues, the markets WILL NOT TUMBLE.  The key, then, is to focus on what will force the Fed to raise interest rates.  Since inflation data is now totally fudged and perpetually at 0.00%, interest rates could stay at ZIRP for years to come.

 

IOW, the Fed will continue to blow the stock market bubble until it is forced to raise rates.

Sat, 12/21/2013 - 20:20 | 4267270 FieldingMellish
FieldingMellish's picture

Absolutely correct. And why invest in zero interest bearing precious metals when the markets are constantly moving up with no possiblity of a serious crash?

Sat, 12/21/2013 - 23:49 | 4267288 Chris Jusset
Chris Jusset's picture

Ultra-low interest rates are forcing investors into highly speculative bubbles, and as long as the Fed maintains this bubble-blowing frenzy, the stock market will not crash.

Sat, 12/21/2013 - 22:14 | 4267456 Gutenberg
Gutenberg's picture

Research Weimar and Zimbabwe if you want to see where this ends with never ending money printing. And when you try to buy precious metals later, they are not there. See recent articles on the vaults of London and Germany asking for a mere percentage of its gold back and the fed saying, um yea, is not here, give me about seven years and allow the u.s. to invade Mali to get that mere percentage back to you. Do you have insurance like health, auto or life or do you try to buy them after an accident, your sick or your dead? JPMorgan must be stupid buying all this physical metal at these low prices also when they get free money every month.

Sun, 12/22/2013 - 21:12 | 4269609 JimS
JimS's picture

Actually, it's a great time to park paper money in gold and silver, as there is no interest lost with rates at zero.

Sat, 12/21/2013 - 20:24 | 4267279 negative rates
negative rates's picture

But it's already been proved that the Fed can not raise rates, that was the 100 years experiment which failed, and what followed was a Fed in denial, and all the tentacles who are now jumping on the coattails of the dying Fed looking for the big returns promised them. The dying Fed experiment could be a catalist to another crisis, it was so confident, so powerful that the dream simply could not die. They made their hell and forced everyone else to live by it's standards or go to war. The unsustainabliliy is undenighable at this point, but the denial can live on forever.

The Fed, always wrong, but never in doubt.

Sat, 12/21/2013 - 20:35 | 4267297 Chris Jusset
Chris Jusset's picture

The Fed is in denial ... Congress is in denial ... and all of our leaders are in denial about the reality that the US now depends on bubbles and ultra-low interest rates to stave off collapse ... and that the US economy will implode once interest rates are forced to rise.

 

The result is the biggest clusterfuck of bubble-blowing the world has ever seen.

Sat, 12/21/2013 - 21:40 | 4267403 negative rates
negative rates's picture

It may very well be. I'm certain the first time there wasn't anyone around to warn the people so the ending had to be one big surprise when it did come. This one though has come with plenty of for warning, yet the message gets lost in all the fun and games because, that is the status quo of an A student hell bent on making and enforcing his own rules.

Sat, 12/21/2013 - 22:28 | 4267486 swmnguy
swmnguy's picture

How can we be sure the Fed is in denial or acting stupidly?  They're part of the global system set up by the real elites; they're not the real elites themselves.  The real elites are running the fiat paper scam as far and as long as they can, but it's their scam.  Fiat paper finance isn't their end, it's their means.  It's the use of such a naked confidence scheme to gain title to everything which is useful whether or not paper money has any worth.  The more of that they have, the lees they care about the value of paper money.  These people aren't foolish or impatient or capricious.  They'll run this game out for as long as they possibly can, to keep people calm for as long as possible, while they amass control over as much as possible.  When they have to, they'll openly reinstate the feudalism that's becoming more unignorable.  They don't care if it takes a few months or a few centuries.  The longer the better actually, as long as there's no reversal in their trend of accumulation. And all the Central Banks and the BIS are just instruments of the goal, not either the planners or beneificiaries.  If the Fed and the others have to take the blame and be the object of all the torches and pitchforks, the true elites don't care.

Sun, 12/22/2013 - 16:09 | 4268962 Pandorable
Pandorable's picture

Spot on. The devaluation of the USD and subsequent economic collapse is by design.

People have to step back from the distractions of extraneous minutae to recognize the pawns that are playing their designated roles in the grand deception to take the fall.

Sun, 12/22/2013 - 13:01 | 4268476 Number 156
Number 156's picture

the Venezuela stock market runs under the same basic principles. its laughable. They are up over 507% for the year.

http://bloomberg.com/quote/IBVC:IND

Sat, 12/21/2013 - 19:19 | 4267188 Mr Pink
Mr Pink's picture

When this index collides with the Hindenburg omen the shit is gonna hit the fan

2014 is the year we see a total collapse!

Please subscribe to my newsletter

Sat, 12/21/2013 - 19:41 | 4267225 Pure Evil
Pure Evil's picture

Please provide a link, but make sure that it redirects to Technical Analysis.

Sat, 12/21/2013 - 21:01 | 4267339 holdbuysell
holdbuysell's picture

Sounds like the streams are about to be crossed

http://www.youtube.com/watch?v=jyaLZHiJJnE

 

 

Sat, 12/21/2013 - 23:15 | 4267620 Hindenburg...Oh Man
Hindenburg...Oh Man's picture

I'm ready, bring it on. 

Sun, 12/22/2013 - 13:35 | 4268613 blackbeardz
blackbeardz's picture

are you ready for what happenned on the USS Ronald Reagan though. That is the de-population event that nobody talks about.

How deep can you burrow? The side show is the fed now. 3-11 bithchez.

 

Sat, 12/21/2013 - 19:22 | 4267191 NoDebt
NoDebt's picture

That's how I'm reading it, too.

Sun, 12/22/2013 - 10:14 | 4268271 johngaltfla
johngaltfla's picture

And now?

 

More like 1/19/14 Chinese banking crisis due to collapse of regional bond markets and lack of liquidity...

Sun, 12/22/2013 - 17:46 | 4269212 Exponere Mendaces
Exponere Mendaces's picture

< Increments the "Any time now, for serious" counter. >

Sat, 12/21/2013 - 19:16 | 4267181 FoolsAdvice
FoolsAdvice's picture

This is an even count, so up?

Sat, 12/21/2013 - 19:14 | 4267182 Squishi
Squishi's picture

can feelings be Tapered?

Sat, 12/21/2013 - 19:50 | 4267232 knukles
knukles's picture

Just ask a few Progressives about that...

Sat, 12/21/2013 - 19:21 | 4267190 sunny
sunny's picture

So, on average, we've gotta wait ~1.5-2 years for some signficant market collapse?  Bummer.

sunny

Sat, 12/21/2013 - 19:32 | 4267210 Ghostdog
Ghostdog's picture

I guess I dont get it. March or 2006 it peaked, which means we ran for another 18 months and one of the lowest levels recorded was early 2008 right before we started out fall off a cliff.. what am I missing here?

Sat, 12/21/2013 - 20:33 | 4267292 Missiondweller
Missiondweller's picture

The volatility in 2007 was a bitch. Up and down 300 points each day.

At that point you could have sold everything, locked in a nice CD rate before it went to zero and just relaxed.

Sat, 12/21/2013 - 21:29 | 4267386 WillyGroper
WillyGroper's picture

07 was one of my best. Made as much trading as I did in the corporate gulag. 

How I long for those days!

Sat, 12/21/2013 - 19:42 | 4267224 Ban KKiller
Ban KKiller's picture

Dopiam and clean beaches. 

Sat, 12/21/2013 - 19:42 | 4267226 Boondocker
Boondocker's picture

none of the charts matter in the new economy..... hedge accordingly...

Sat, 12/21/2013 - 19:53 | 4267233 max2205
max2205's picture

All the stores I went to today were not very busy....

Sat, 12/21/2013 - 20:13 | 4267267 Spungo
Spungo's picture

That's bullish. It means more money printing next month.

Sat, 12/21/2013 - 20:00 | 4267237 FieldingMellish
FieldingMellish's picture

This has all the hallmarks of a blowoff top coming like 1998-2000. Look for another 400-500 points on the S&P at the very minimum. Gold down to $980.

Sat, 12/21/2013 - 20:07 | 4267252 sunny
sunny's picture

Sheiiish, always the optimist.

Sat, 12/21/2013 - 20:11 | 4267259 FieldingMellish
FieldingMellish's picture

Don't worry. After that, the S&P crashes back to 1800 while gold climbs back up to $1180. That's when the fun begins...

Sat, 12/21/2013 - 20:33 | 4267296 Missiondweller
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After that the price of the S&P and gold switch places.

Gold goes to $1800 while S&P goes to 900

Sat, 12/21/2013 - 20:53 | 4267325 FieldingMellish
FieldingMellish's picture

Possibly. The other scenario is that gold moves back into its bear market which takes it down to double digits in a decade or two.

Sat, 12/21/2013 - 21:01 | 4267336 fonzannoon
fonzannoon's picture

The S&P is heading to 2,500 in fairly short order. Gold is heading under 1k. 

 

Sat, 12/21/2013 - 21:26 | 4267379 FieldingMellish
FieldingMellish's picture

Why do more people not see this?

Sat, 12/21/2013 - 21:54 | 4267420 fonzannoon
fonzannoon's picture

I don't know. I also don't know why more people don't just short paper gold and go long stawks and use the gains to purchase phyz if that is their thing.

Maybe it is because of articles like the headline article keeps people tied to the belief that the shit is just about to hit the fan.

Sat, 12/21/2013 - 21:56 | 4267421 FieldingMellish
FieldingMellish's picture

People have been prepping for the Armegeddon for 2000 years. One day they may be right but not in my grandkids lifetimes. Meanwhile... opportunity costs...

Sat, 12/21/2013 - 23:09 | 4267605 Clowns on Acid
Clowns on Acid's picture

fonz - most of Asia disagrees with you. And they are the Creditors....

Sat, 12/21/2013 - 23:42 | 4267665 fonzannoon
fonzannoon's picture

i'm not saying not to buy gold. i'm just offering a possible way to make your purchases more efficient.

Sun, 12/22/2013 - 07:19 | 4268102 new game
new game's picture

cognitive dis. is the reason.

gold is useless. zero utitlty.

how long would you tolerate a woman that just sat there and didn't put out?

thought so! moar, u fucking idiot, buy moar to sit and piss u off...

Sun, 12/22/2013 - 07:24 | 4268107 new game
new game's picture

psst-i have a little "just to piss myself off" hehe

and

when she does nothing, is sometimes, is ok by me...

the whole thing is one big fucking joke.

if gold din't exist and was never discovered and covetted would our lives be any different?

fuck no, you have been dupped, face it, the masters are right- it is useless in modern day

electronic digital money systems.

paper will become useless next.

way it is.

do you have the faith?

just stating the obvious...

shoot the messanger-bang!

didn't say i liked it!

Sun, 12/22/2013 - 21:20 | 4269630 JimS
JimS's picture

Double digits? Wow, I need to get some of the shit you're smoking. Do you use a bong, or just a doobie?

Sat, 12/21/2013 - 20:16 | 4267268 lasvegaspersona
lasvegaspersona's picture

When gold hits 980 it will be hated so much it will be all gone.

Sat, 12/21/2013 - 20:33 | 4267271 FieldingMellish
FieldingMellish's picture

I'm saving that for $98, not $980. Maybe 10 or 20 years from now.

Sun, 12/22/2013 - 07:34 | 4268114 new game
new game's picture

i like you am done with the gold thingee. realize the follie of it all. can put the digital equevalant to much better use. something with utility, land, lead, leave it to beaver lunchbox, 56 chev. cases of fine wine, old guns, colts,... list goes on and on, so officialy i have flipped to "fuck gold"...

looked at the stack and what a fucking waste of my labor(it represented) and decided it was times to get it to a greater fool...hopefully it gets to china and collects dust over there and takes productive capital out of that system...

Sun, 12/22/2013 - 07:38 | 4268116 samcontrol
samcontrol's picture

you are saving in fiat to buy gold 20 years from now at $$99 or below !?!?!

I read many stupid ass predictions on here , But that one wins the prize for the mega tard post of 2013 . You Sir are an idiot , 16th century village idiot.

what is wrong with you .??. What fucking planet are you from?. Your brain cannot handle drugs so stop!!

Sun, 12/22/2013 - 10:30 | 4268288 Dig Deeper1
Dig Deeper1's picture

You seem to be making the fatal assumption that gold, or anything else will be worth anything in $$ 20 years from now.  If you restate your price target in renminbi 99 will likely be worth about $2,000.  Just a matter of perspective.

Sun, 12/22/2013 - 17:15 | 4269154 logicalman
logicalman's picture

1933 - $20.67

2013 - $1203

More of a comment on the value of the dollar, I know.

BitCoin in 80 years?

Sat, 12/21/2013 - 20:04 | 4267239 Yen Cross
Yen Cross's picture

   Bob> Piss-on'-ME   Is that the proper grammatical pronunciation?

Sat, 12/21/2013 - 20:01 | 4267240 max2205
max2205's picture

The SPY TLT ratio is almost back to the 2007 highs SO I would say the fed will have/has room to crash/take down stocks to run bonds up and yields back down

I don't think they have a choice.... China's SSEC is at 2004 levels which is a red flag for all the other country indexes at all time highs....something's got to give soon.

Sat, 12/21/2013 - 20:04 | 4267245 ThisIsBob
ThisIsBob's picture

Is there a trade off that chart?  What and when is it?  Or will I need Pink's newsletter.

Sat, 12/21/2013 - 20:34 | 4267269 logicalman
logicalman's picture

Double post.

Sat, 12/21/2013 - 20:20 | 4267273 logicalman
logicalman's picture

Charts are the past and may help you understand how we got here, but they aren't neccessarily going to help with the future

The future may or may not follow them.

All will be revealed in the fullness of time.

The last three times I cycled in the snow I didn't fall off - so I guess I'm all good!

 

Sat, 12/21/2013 - 20:40 | 4267303 Yen Cross
Yen Cross's picture

 When levels reach extremes, charts provide good historical reference.

Sat, 12/21/2013 - 21:13 | 4267356 Seal
Seal's picture

u mean 'prediction is difficult, especially of the future'?

Sun, 12/22/2013 - 09:32 | 4268216 Winston of Oceania
Winston of Oceania's picture

I'm certain this time is different.

Sat, 12/21/2013 - 22:09 | 4267450 TheRideNeverEnds
TheRideNeverEnds's picture

so in another several years the markets might go down... good to know.

Sat, 12/21/2013 - 22:28 | 4267493 swmnguy
swmnguy's picture

"Turmoil" is a verb now?

Sat, 12/21/2013 - 22:34 | 4267505 sunny
sunny's picture

Is "turmoil" a verb?  To turmoil?  Huh?

sunny

Sat, 12/21/2013 - 23:06 | 4267596 GeezerGeek
GeezerGeek's picture

Of course not, but people keep misusing words because they're unable to find a proper one to use. Consider 'impact', which went from being a noun to also being a verb, probably because too many writers felt bad about not being able to discern between affect (a perfectly good verb) and effect (both a valid noun and a valid verb). Easier just to make up something new, hence 'turmoiled'.

Sun, 12/22/2013 - 01:29 | 4267841 StychoKiller
StychoKiller's picture

Bah, verbogeny is one of many pleasurettes afforded a creatific thinkerizer.

Sun, 12/22/2013 - 09:58 | 4268254 MSimon
MSimon's picture

Is termoil even a word?

Sun, 12/22/2013 - 14:14 | 4268709 TumblingDice
TumblingDice's picture

you're a verb

Sun, 12/22/2013 - 02:41 | 4267929 Clowns on Acid
Clowns on Acid's picture

The Fed doesn't know how to "skew" the skew ...yet.  

Sun, 12/22/2013 - 05:51 | 4268060 BigSimes
BigSimes's picture

Get with the program:

The Fed and the TPTB toy with the US & therefore global economy until they've sorted out a deal with the Chinese.

When the deal is sorted out, and China has enough gold to back up their side fo the deal, the reset begins, and the world is carved up between the Chinese and the TPTB.

Everything else is NOISE.

If you come from are an obedient and loving tribe, you will be enslaved by your own beleifs.

Mon, 12/23/2013 - 08:02 | 4270366 kenezen
kenezen's picture

If your comment was really valid you'd identify TPTB and discuss your choices! Your concepts of that may be very different from others. By the way it's rumored that China already has sufficient gold to become the next Reserve Currency.

Mon, 12/23/2013 - 09:23 | 4270476 Fundamental Momentum
Fundamental Momentum's picture

In 1998, stock soared 22%. Maybe this is the signal of an upside move that will crush the shorts?

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