The VP Blog

A blog about financial markets and the VP investing framework

Complacency sees Vol Sellers Return in Numbers

Short volatility positions are back at extreme levels once again, showing the growth of complacency among market participants. The more dovish than expected Fed has allowed volatility sellers to become more emboldened, and speculative VIX future positions are back up...

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Hints of Eurozone Reintegration

The reduction in cross-border financial asset holdings and regional trade across the eurozone are perhaps the most visible scars left from the global financial crisis and subsequent fallout in European sovereign debt markets. Under pressure from national regulators to...

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Use Risk Rally to buy Default Protection

This post was taken from our March 5th weekly report. In line with rebounding equity markets following the 4Q18 correction, credit risk-premia have compressed sharply. This is particularly notable for the big political risk plays of 2018. UK CDS spreads have narrowed...

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Death by Extrapolation

Extrapolation has killed more people, companies and portfolios than almost anything else we can think of. You assume that you’ll continue to be healthy until you get that cancer diagnosis or fall to the floor from a heart attack. You assume profits will continue to...

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Outsize demand for risky Italian bonds

Going by the strength of demand at recent Italian sovereign bond auctions, it would be easy to forget that the government was recently locked in an acrimonious dispute with Brussels over its budget deficit target for 2019. Now that the budget fiasco has died down,...

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Eurozone deflation risk remains

Market momentum is building behind the global growth slowdown narrative, with last week’s downbeat European Commission forecast report triggering a safe-haven bid. The eurozone, in particular, is caught in the crosshairs with the German and Italian economies buckling...

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Things are looking up for US energy

US energy equities have been the worst performing sector on a trailing 12-month and 6-month basis (top-left chart), with most names falling below their 200-day moving averages. The top-right chart shows that historically whenever less than 5% of the constituents in...

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