Category: Volatility

Valuation and Volatility

U.S. stock valuations are rising. One way to measure that is the CAPE ratio, which smooths earnings over a ten year period. This ratio for the S&P 500 hit 28.7 this week, which is in the 94th percentile going back to 1928. The only periods in history with a higher CAPE ratio were July through […]

Volatility and Mean Reversion

“Don’t confuse lack of volatility with stability, ever.” – Nassim Taleb Volatility is low. How low? Over the past month, the Dow Jones Industrials Average has traded in a range (from high to low) of 1.4%. Going back to 1970, that’s the least volatile period in history. At 2.2%, the same range for the S&P […]

“Between calculated risk and reckless decision-making lies the dividing line between profit and loss.” – Charles Duhigg Anyone else remember how scary the first few weeks of 2016 were? I know – feels like forever ago.  We went from the worst start for stocks in history to what has thus far been a pretty decent […]

Never Short A Dull Market?

“Never short a dull market.” – Old trading adage The stock market has become unquestionably dull in recent days. Volumes are down and volatility, as measured by the VIX Index, has plummeted. In the past 4 weeks, this index has declined by over 55%, the largest 4-week decline in history. At under 12, the VIX […]

“The world we live in is vastly different from the world we think we live in.” – Nassim Taleb Given enough time, the market will make a fool out of anyone basing their expectations for the future on a normal (or Gaussian) distribution. Why? Because financial markets do not follow a bell curve. Instead, they […]