Markets Are Scary

August 4, 2011 at 9:54 pm Leave a comment

It looks like my TSP account is going to take its daily hit.  According to the Chicago Board Options Exchange’s VIX index, the markets are going to take a major rough and tumble. As reported by Barron’s

The Chicago Board Options Exchange’s Volatility Index (VIX) closed Thursday at 31.66, rising almost 36% as the Dow Jones Industrial Average fell 504.70 points. The fear gauge’s rise was one of the sharpest advances in months, and it propelled VIX to a new 52-week high. This move above the old 52-week high of 31.28 will be interpreted by some as a contrarian indication to buy stocks – which is premature.

VIX could rise much higher Friday if the employment data is worse than expected. VIX’s surge Thursday shows that investors are very afraid. Options that would increase if VIX surged above 30 traded actively. Almost 70,000 VIX August 32.50 calls, and some 54,600 VIX August 35 calls. The prices of the August 32.50 call and August 35 calls were sharply higher, indicating expectations that VIX could continue to rise.

It is not a time to put your 401k in the markets. It is time to put your money in gold and silver if you can afford the extra liquidity.
This voliality was marked because the markets dropped by 500 point as noted by Bloomberg


A global rout in equities drove the Standard & Poor’s 500 Index to its worst slump since February 2009, while two-year Treasury yields plunged to a record low amid concern the economy is weakening. The yen pared losses, recovering from the biggest drop versus the dollar since 2008 that was triggered by Japan selling its currency.

The S&P 500 tumbled 4.8 percent to 1,200.07 at 4 p.m. in New York. It has dropped 11 percent since July 22, the biggest loss over the same amount of time since March 2009. The MSCI All-Country World Index slid 4.1 percent as Brazil’s stocks slumped to a two-year low and Switzerland’s entered a bear market. Two-year yields declined as low as 0.25 percent. The yen sank 4.1 percent against the dollar before trimming its loss almost in half. Oil sank 5.8 percent to help the Thomson Reuters/Jefferies CRB Index of materials erased its 2011 gain.

I really do not need this stress in my recovery, but I am going to have to deal with anyways.

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