The VIX is trading up over 3% this morning, for the second day in a row. It closed yesterday, on a strong up day for stocks no less, up 5%. Clearly options traders are actively hedging the downside to start the week.
Like yesterday morning, oil's down, gold's up. This time confirming the early morning equity action. Copper's flat. The dollar's flat this morning as well.
Yesterday, the National Bureau of Economic Research (NBER) made the present recession official, and, ironically, the Nasdaq closed at an all-time high. Counter-intuitive? Of course. A reflection of the moment in investor behavior? Of course. Reminiscent of history's bear market rallies? Yes.
Speaking of investor behavior, here again, from last Thursday's morning note, is B. Mandelbrot on behavioral economics:
"It studies how people misinterpret information, how their emotions distort their decisions, and how they miscalculate probabilities."Speaking of potentially misinterpreting information, distorted decision-making and miscalculations, get this from Bloomberg yesterday:
"Investors are piling into stocks of bankrupt companies, wagering against a court process that routinely wipes out shareholders.So reminiscent of the dotcom bubble!
Car renter Hertz Global Holdings Inc., oil driller Whiting Petroleum Corp. and retailer J.C. Penney Co. are among companies that have seen their shares more than double in recent trading sessions despite being in Chapter 11 bankruptcy, a process that allows companies to keep operating while working out a plan to repay creditors.
“I have always thought people have a psychological urge to buy stocks at a low price,” said Kirk Ruddy, a former bankruptcy claims trader. Retail investors may be buying big names they recognize without realizing how rare it is for shareholders to get anything back in bankruptcy, he said.
“If you look at the markets in general, people don’t know where to put their money. They are like ‘Hey, I’m going to try that $1 stock...”’