There's a lot of marketspeak in here but the concepts put forth are:

1) Unlike a natural system, stock market "weather" can be caused intentionally

2) Because it's been impossible to make money in traditional trading, firms that must make money (pension funds, for example) are making money with short strategies on synthetic indices (whenever anyone talks about "shorting the Vix" they're talking about betting against a synthetic fund designed to track the most common volatility index)

3) The behavior of that index has become decoupled from what it references as a result

4) complications ensue

    The hurricane is not more or less likely to hit because more hurricane insurance has been written. In the financial markets this is not true. The more people write financial insurance, the more likely it is that a disaster will happen, because the people who know you have sold the insurance can make it happen. So you have to monitor what other people are doing.

Victor Hagani


I thought it was worth waking this thread up to add a chart of XIV making beautiful returns until it didn't.

posted by kleinbl00: 622 days ago