So today VIX closed 27.86. Whenever VIX closed above 27, SPY is up in next month.
I am not suggesting anyone to buy, but presenting a data point I heard/ read. Separately, today, the new 52 week lows has come down. If you are looking for additional data point, look for follow-through days.
A hedge fund focused on Index rebalancing lost $900 M; Of course they are going to survive. But keep an eye for similar news items. Typically some over-leveraged hedge fund blows up. That’s another tell-tale sign of a bottom. By the time most of the selling done.
Market bottoms never happen in one swell foop, there’s always a multi-step path to the basement. It falls, the over-eager jump in, then it falls again, further this time, and a smaller pool of “this must be the bottom” jump back in. Rinse, repeat.
Am I saying this will be as bad as 1929, or the dot-com bubble, or the housing crash of 2008? I am not. I am saying that the bottom takes a while to show itself, and two or three days worth of significant down” is probably not it.
Patience, prudence.
It is not just few days, we have now 10% decline. We are not having recession, any major economic dislocation. I am not advocating anyone to rush, but you need to be getting ready.
If you wanted to study this, you should not be using major economic downturn charts, but normal garden variety declines. Unless you think there is a reason our current situation is similar to 2007…
No, but I do think it’s similar to the dot.com bust of 1999/2000.
A few issues sporting outrageous predictions of the future (Tesla, Nvidia), others sporting really high multiples, even as entire sectors of the economy are hollowed out (office space, automotive) and others get desperate (other retail: Kohls, Walgreen).
Now I’m not saying that the future won’t play out as Tesla and/or Nvidia forecast: the dot-com bubble didn’t destroy the internet - it just ended up in others’ hands. It wasn’t AOL or Excite or Yahoo or Lucent that owned the future. Amazon came through it, but Pets.com did not. Tesla and Nvidia may be fine, although I expect their lofty valuations to return to “merely aggressive” rather than “lunatic sky high”.
Meanwhile everybody gets dragged down by the undertow. It took even the tradition bound DOW took several years to recover, while for the Naz it was a decade in the dumps. Sure, some individual prospects did OK, and if you can pick them amongst the landslide of others that are falling, bully. I don’t think I can, although I have kept some stuff as I cleaned out over the past few months: BRK, COST, XOM, that sort of thing. I just bought some DG because I think the problems are easily fixable, it’s already fallen 70%, and a recession should have its clientele fishing for smaller portions at lower prices. But absent that, I’ll wait a while.
Your mileage, as the cliche goes, may vary.
I hear you… but the time to be concerned was 4 to 6 weeks ago! I was negative (short calls of $PLTR, $TSLA and went neutral on $NVDA by converting my shares to $100 covered call, not buying during deepseek sell-off and let half of the covered call go In Feb, and 40% of the remaining will go away March…)
Having said that, few points to consider:
Unlike dot.com, the customers of $NVDA are hyper scalers, who are talking about $50, $60, $80, 100 B cap-ex. Both $NVDA and its customers are making tons and tons of profit, to the tune of $50, $100 B each.
The commercial real estate (medical offices, hotels, industrial storage) is okay except office space and multifamily. Except few smaller and regional banks, the banking system as a whole is adequately written off or the loans are very low % of their loan book. I have gone through (BAC, C, JPM, WFC) and (TFC, PNC, USB, KEY). Banks have really de-risked and the impact of systemic issue is very low. Office space is not housing crisis by any stretch. By the way you can throw in multi-family into the problem loans, because most of it is financed with < 3% and the refinance is going to be at 7%, so either the owners have to bring in equity or mail the keys. We need to see how it plays out.
Not all retail’s are doing bad, some are. However, consumer is the engine of USA and their confidence is being tested on daily headline about layoffs, and tariff news. It is a potential area to watch out.
I am planning to raise cash on rallies from some names.
Now having said all of this,there are areas where opportunity exists. One has to be prepared that’s all. From my own portfolio, buying $AES post earnings was almost a slam-dunk call. Even today, I think over a 1 to 2 year period, buying at current price will give you 6% yield and another 25% stock price appreciation potential with low opportunity to go down from here. If you want to get back and start buying, you need to be prepared.
Different folks have different risk tolerance and different goals. While on one hand I am cautious, but I am also trying to see when can I get back in some names.
I notice your graph goes back all of two years.
Take a look at it in February of 2020 and let us know if the S&P was higher a month later. 
We are not having once in a century pandemic at hand. So you should compare the normal times drawdown to past normal times drawdown.
5 years from now, we will be much much higher. Buy great businesses at fair prices. Ignore the market timers. You will get very rich.
Why? The VIX chart does not care about normal or non-normal.
If you are believer in mechanical investing, then the external fundamentals are not as relevant.
Yes it does. In any case, see my other posts…
Hey, I give you props for the slick way you tried to move the goal post! Well done.
Unfortunately for you, I am too savvy for that.
Let’s revisit your opening claim, shall we?
NOW, you want to make the claim, the S&P was higher one month after it PEAKED. That is a different standard.
Simple question: Was the VIX higher than 27 at the end of February 2020? Where was the S&P one month later?
Here, I will save you the trouble and help you from moving the goal post again. 
??? No it doesn’t. The VIX doesn’t discount or otherwise produce a different number simply because the volatility is caused by a pandemic instead of a war. Can you post anything that supports such a claim?!?
The VIX is calculated using a "formula to derive expected volatility by averaging the weighted prices of out-of-the-money puts and calls.” Using options that expire in 16 and 44 days respectively, we will start on the far left of the formula in the example below. The symbol on the left of “=” represents the number that results from the calculation of the square root of the sum of all the numbers that sit to the right multiplied by 100.
Can you point to where they weigh tariffs or pandemics in that data? I can wait.
I posted something, that I read/ heard. It is not actually VIX Peak but 1 standard deviation move. You could have applied the same to 2000 period also.
There is no need for me to move the goal post or trick you. You are free to make your own judgement.
I am not interested in these gotcha discussion. If you think you have to ignore this, by all mean do it. I am not trying to convince you and make anything out of it.
Cheers and bye
And I appreciate it. Full Stop.
But, then you also have no need or reason to defend it when it is pointed out to you that what you heard/read is wrong (hint: you should appreciate it).
The easiest and the most mature response is to simply acknowledge the correction and move on.
Cheers.
I would have and still will. If you are bringing the right set of comparisons. Bringing in once a century pandemic and still the data held with a slight lag. If you want to compare Orange and Banana and arguing they both are fruits, great, I don’t need to be part of that conversation.
Set aside Tesla for a moment. What NVDIA is talking is not outrageous future but something that is already happening. When $NVDA says, you need 100x, 1000x compute for reasoning, he is not just pulling something out of the air. $NVDA is producing faster, more capable chips, the networking technology, memory technology all improving. Lastly the software that can consume all those capabilities are evolving.
Way back, when I first started in IT, my first PC had 16K Ram. Today PDF or word documents are 1 MB and some are 1G. The original PC cannot even load these documents in memory.
The cycle time in technology is shrinking at alarming rate. I do believe there will be some digestion phase in AI, $NVDA and there are some outrageous valuation like $PLTR at 40,50,60 times revenue, etc.
But their predictions are not outrageous.
Well that’s true, except when it’s not. Yes, it’s true that AI is a thing, yes it’s true that there’s going to be more and more of it, yes it’s true that Nvidia has been supplying the chips for it.
What could be different is that the Chinese are doing AI with lesser, industrial grade chips which seem to be functioning as well, or almost as well, by using simple software hacks - obviating the need for grossly expensive (and high margin) products such as Nvidia is selling.
Now I don’t know what direction AI might take, but I suspect if I can get the same, or at least similar performance out of a chip that costs 90% less, the market for Nvidia products will shrink drastically over the next few years. If the Chinese can do it, how long will it be before Apple, Facebook, Google, or others replicate it?
Maybe it won’t work out that way, dunno. But “dunno” is the opposite of “working investment theory”.
