Are Investors Too Complacent About Risk? (VXX, CVOL, VIXM, VIXY)

Although factually incorrect, the saying “Nero fiddled while Rome burned” is still a popular and commonly used cliche. So along those lines, given the global breadth of problems currently weighing on the minds of investors, wouldn’t it be fair to say that a very orderly seven-week, 7% slump in stocks has been… muted? Michael Purves, Chief Market Strategist at BGC Financial thinks so, and points to the CBOE Volatility Index (^VIX), or the Vix as evidence.

“It’s really amazing” Purves says in response to Macke’s suggestion that most traders found Kung Fu Panda II scarier than this market. “What’s crazy is how the Vix and volatility have been suppressed as much as they have been.”

He says when the market fell 7% this spring after the Japanese earthquake, the Vix doubled, whereas this time it has only gained about a third of that amount amidst a comparable decline.

And versus the slide in May and June of 2010, Purves says the Vix not only spiked then, but stay elevated for a long time.

So what’s going on? Why are investors suddenly so cool? See the full “Breakout” video below:

Related ETFs: iPath S&P 500 VIX Short-Term Futures ETN (NYSE:VXX), C-Tracks Citi Volatility Index TR ETN (NYSE:CVOL), ProShares VIX Mid-Term Futures ETF (NYSE:VIXM), ProShares VIX Short-Term Futures ETF (NYSE:VIXY)

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