How long before the wheels come off?
Friday, 21 May, 2010 Leave a comment
The Right Side newsletter says:
Trying to drive while a passenger’s fat, clumsy hands are grabbing at the wheel is practically impossible. Nobody’s certain of where the car’s going…
Right now we’ve got politicians all over the globe grabbing at the wheel, causing uncertainty like we’ve never seen before. And it’s uncertainty that markets hate most.
Look at how the markets went hysterical when the Germans announced a ban on short-selling certain financial instruments. The announcement came seemingly out of the blue, making markets even more suspicious… what do the Germans know that we don’t?
Then in Washington, the US Senate voted 94:0 to stop the IMF “using its cash to help countries that are inextricably trapped in a debt spiral”. Now, that looks pretty serious to me and it’s riddled with uncertainty. Which countries are ‘in a debt spiral’? I thought that Greece was… so does this mean Greece isn’t getting a loan after all?
And this morning we read that the US has just voted through new legislation to tackle the banks, Obama says that Americans will never again pay "for Wall Street’s mistakes"… markets hate this sort of thing…
How do we know… because the Vix index tells us…
What the Vix index is telling us
The Vix moves up when investors are fearful. And just look at how the index is spiking now (blue arrow).
2 Year Volatility Index (VIX)