Great data Lenore, thank you. One of the reasons I don't feel comfortable about the current rally is that every time the VIX has settled down into the high teens it's been the precursor to another surge in volatility and another market drop.
I have seen some data that showed the market has changed characteristics since the Treasury downgrade -- higher volatility and lower volume.
I may not get angels singing, but I have the next best thing, @Lenore...you and @Fred guiding us IU readers past the macro and micro trends that are the Scylla and Charybdis of this crazy market. Thank you for a VERY enlightening post.
One trend to note is that JIT inventory practices are said to be loosening up to widen the margins in the supply chain. Because of the rather catastrophic events in Asia, especially in the electronics sector, a move is seen to create a buffer against shortage. This may have a dampening effect on volatility, but companies could see depressed cash flow if their assets are tied up in inventory.
Because of the dependence on global suppliers, manufacturers have to walk an especially fine line when it comes to inventory. JIT is a great concept, until a disaster disrupts supply. And of course it's nice to have a big inventory on hand, but why has the resources to fund it?
White JIT inventory systems can prevent waste, I've seen too many managers in charge of ordering or purchasing who were unfamiliarize with alternative shipping methods -- options like ess-than-truckload (LTL) carriers who consolidate loads and routes, or the possibility of coordinating shipments with other companies in a geographic areas.
That's created some wariness of JIT systems, especially if there is a hope or expectation that business is likely to be on an upswing. Bottom line: it makes sense that inventories are growing.
It is, @Askasa and seems to cover many of the key issues. I like visualizations because they crystallize concepts so clearly.
Wasn't criticizing the chart (which is great), was just trying to make a little jokey-joke. Kind of.
It seems like still a lot of Wall St. hasn't read "The Black Swan." They still act as if everything little "risk" that pops up is a big surprise.
And ... to make things worse... the powers that be are insisting on piling debt upon debt upon leverage. This RAISES the risks. LEVERAGE IS RISK. Why is deleveraging so bad if in the end it leads to a less riksy world?
This quote about deleveraging from Bill Gross's February comment for Pimco has become pretty popular the past few days:
"A 30-50 year virtuous cycle of credit expansion which has produced outsize paranormal returns for financial assets----bonds, stocks, real estate and commodities alike----is now deleveraging because of excessive risk and the price of money at the zero-bound. We are witnessing the death of abundance and the borning of austerity, for what may be a long, long time."
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Forget about business growth as long as the future of tax rates remains unclear, regulation continues to expand in unpredictable ways, and legislation keeps creating increasingly onerous burdens.
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