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Calm Before The Storm? VVIX/VIX Ratio Hits Level Not Seen Since Before Last Market Crash
At the midpoint of August, the S&P500 appears to be on track for one of the quietest months on record. Despite weak Chinese data, Delta concerns, and the chaos in Afghanistan, stocks are levitated at all-time highs, but under the surface, anxiety is increasing.
Bloomberg points out that the implied volatility in VIX options continues to advance for five out of seven weeks even though VIX has sunk. This has put the ratio VVIX/VIX at a mind-numbing level of 7.5 on Monday, a reading that has preceded market crashes in the last several years. Going back to 2017, when VVIX/VIX broke above 8, or near today's current level, it didn't end well for stocks.
A report compiled by Chris Murphy, co-head of derivatives strategy at Susquehanna International Group, wrote that since 2006 when the ratio trends higher - about ten days later - the VIX on average would surge by around 16%.
Some of the anxiety building behind the scenes is due to the Jackson Hole meeting of global central bankers next week. There's the possibility the Federal Reserve will announce or at least tell market participants about an upcoming tapering of its monthly $120 billion bond-buying program since the pandemic began. Susquehanna's Murphy wrote in a note, "this ratio being stretched can be a sign that a subdued VIX does not tell the whole story (volatility expectations for the VIX are actually creeping higher)." He added, "historically, the VVIX/VIX ratio does not remain this elevated for too long, and when the ratio reverts, the VIX spikes."
Nervousness could also be building as Goldman Sachs Scott Rubner told clients last month that August is the worst seasonal period for markets. Another Goldman strategist, Christian Mueller-Glissmann, warned it'd been nearly 200 days since major equity indexes have had a 5% drawdown session. Perhaps the VVIX/VIX ratio is signaling that a correction in S&P500 looms. All that needs to happen is a catalyst, and that could happen at Jackson Hole.
https://www.zerohedge.com/markets/calm-storm-vvixvix-ratio-hits-level-not-seen-last-market-crash
What Is the Cboe Volatility Index (VIX)?
The Cboe Volatility Index (VIX) is a real-time index that represents the market's expectations for the relative strength of near-term price changes of the S&P 500 index (SPX). Because it is derived from the prices of SPX index options with near-term expiration dates, it generates a 30-day forward projection of volatility. Volatility, or how fast prices change, is often seen as a way to gauge market sentiment, and in particular the degree of fear among market participants.
The index is more commonly known by its ticker symbol and is often referred to simply as "the VIX." It was created by the Chicago Board Options Exchange (CBOE) and is maintained by Cboe Global Markets. It is an important index in the world of trading and investment because it provides a quantifiable measure of market risk and investors' sentiments.
https://www.investopedia.com/terms/v/vix.asp
Palantir Buys $51 Million in Gold Bars, Accepts Payment in Gold
Palantir Technologies Inc. said it’s preparing for another “black swan event” by stockpiling gold bars and inviting customers to pay for its data analysis software in gold.
The company spent $50.7 million this month on gold, part of an unusual investment strategy that also includes startups, blank-check companies and possibly Bitcoin. Palantir had previously said it would accept Bitcoin as a form of payment before adding precious metals more recently. A spokeswoman for Palantir said no one has yet paid in either Bitcoin or gold. Accepting nontraditional currencies “reflects more of a worldview,” Shyam Sankar, the chief operating officer, said in an interview. “You have to be prepared for a future with more black swan events.” The gold purchase was buried in a securities filing last week for its quarterly financial results and reported earlier this week by Barron’s. The acceptance of gold as a form of payment hasn’t been previously reported.
Palantir’s 100-ounce gold bars will be kept in a secure location in the northeastern U.S., according to the filing. “The company is able to take physical possession of the gold bars stored at the facility at any time with reasonable notice,” Palantir wrote (BWAHAHAHAHAHAHAHAHA-sure!!!). Palantir, co-founded by the technology billionaire Peter Thiel and Chief Executive Officer Alex Karp, makes software used by governments and businesses. It fashions itself as a company of free thinkers. Palantir relocated to Denver last year and mocked its peers in Silicon Valley on the way out. Governments have strongly embraced Palantir software to help them make sense of the coronavirus pandemic, the current so-called black swan, a random and unpredictable event.
The company has some $2.3 billion in cash and is exploring creative uses for that money. Palantir said in an earlier financial report in May that it was considering investing in Bitcoin.
https://www.bnnbloomberg.ca/palantir-buys-51-million-in-gold-bars-accepts-payment-in-gold-1.1641197