As far as crashes go, this one has been pretty orderly. Volume continues to be heavy, which I see as one of the few encouraging sign. Ironically Treasuries are up—but lower than investment grade paper is getting hammered. Obviously the big fear is a recession—but without any real news, similar to the Japanese earthquake/tsunami/reactor meltdown correction.
VIX is at 44 right now. I wouldn’t be shocked to see it touch 50 before it starts winding its way down. I’m accumulating XIV right now because I think the heavy action in the volatilty futures is probably over, and it is cheap enough (in the low 10s) that even in the worst case scenarios the losses would be manageable. I don’t pretend I can pick the top—or the bottom. I’m looking for when the odds seem weighted in my favor.
Monday, August 8th, 2011 | Vance Harwood