My calculated vix (red) vs hyg(yellow,inverted) vs usdcad (light blue) vs the vix....
There is some serious math and currency games to keep vix low
plopping on oil (white)
theres a correlation btw vix and price of oil
And adding dxy - theres a correlation between the vix and dxy
Adding usdeur and svix
gaming oil bleeds thru to the vix crushing volatility.
If there becomes a time oil can no longer be suppressed, we might experience a volmaggeden event.
More evidence
SQQQ is 3x inverted q's (aka short 3x)
And $SQQQ vs $TQQQ
My gut tells me its a combination of swaps with EU & Canada, gaming the vix directly w/ $UVIX and $SVIX thats held back an epic crash of US stonks....
As EU strengthens, USD weakens
The red line here is my calculation for Fed currency games
Formula is
(1/(BATS:UUP*3.3-BATS:SVIX*5)*10+0.5)/100
So who is gaming the vix?
The fed.
Clear as day.
For those of you arguing "you used the definition in the definition" (yes it includes SVIX)
Here is same chart, just UUP (usd) as yellow.
Behold the correlation....
And this is why backtests are total bullshit.
Regimes change - esp in extraordinary times.
If you dont change as the regime change you become roadkill.
The ONLY way this regime is broken - is if $OIL breaks thru - aka - supply disruption that cannot be countered by the SPR... or a material blackswan event overseas (aka EU cannot raise interest rates anymore)
Here again is my formula for the vix (deep red)
it tracked the vix very well....but something changed....
Since sept in nearly exactly tracks HYG
and the vix (purple) is tracking OPPOSITE....
And another perspective
This red line (1) represents my interest rate power function.
As Bonds++, the longer the duration, the higher the impact to the currency....except...this is not happening...prolly b/c of #swap's
And what i see happening - as Canada raises interest rates, i see vix following right along
Regime change in that box.
$Vix hits single digits?
(note inverted scales)
The oscillations in $SVIX are getting bigger and bigger
and jPan's fingers look like they are all over it...
And it almost looks like the $vix itself has become a currency.....
Notice its movements relative to other currencies.
Now im going to add a mind blower - i literally been noodling on this all year (if you followed me, im sorry - this is quite a puzzle im trying to solve)
My gut is now telling me UVIX/SVIX are conduits to enable these swaps - aka - foreign CB's use UVIX/SVIX to rebalance interest rates - it is THE mechanism to move currencies and rebalance DXY
Here $DXY is in purple
And here adding $SVIX and $UVIX
Remember UVIX is the inverse long term vix contracts
and SVIX is the 1:1 short contracts
And stepping back - US wealth is concentrated in STONKS.
Which means, Fed wants to balance and use that giant pile of $$ in currency markets.
These vix tools allow the fed to leverage/hedge US stonks vs global currencies/global bond markets.
What do you think?
more - now look at currencies vs bonds.
How would they do this relative to ea other?
I looked at fed and treasury holdings - they aint got shit other currencies on their books.
and this is so important - how do you stop vol? by making goddam sure that every opposing country moves their interest rates RELATIVE to each other so there is no sudden shock to system where there is a massive change in rates.
My suspicion is that those vol tools that blew up were also CB sponsored;So deep diving Feb 2018 volmageddon (1) event- what really happened?
jPan (the worlds bond police) sold both US and EU bonds (2,3) to try to stop oil from spiking (4).
The result?
The vix controls inflation &deflation in the stonk.
It also helps to control inflation in certain commodities (those that r produced domestically) where it stimulates inflation in commodities that r not produced domestically.
There r analogue measures for the vix.
👇🧵
lets start with the simple one - dxy, a basket of g7 currencies....
There has traditionally been a somewhat strong correlation btw dxy and the vix - that correlation was broken march 2022...see if you can see why....
As the fed lifted rates, it crushed stonk because its better to just buy bonds.
The banks blew up and we off to the races with vix crush - the fed is desperately trying to get yields up to slow demand as OPEC cuts production (remember -no more spr to suck down)investopedia.com/terms/b/blacks…
Why is MBS a pariah and Putin must not remain in power? Why did Gadaffi and Saddam have to die?
Because of Oil.
Oil is inflation.
Inflation is any countries Achilles heel - in particular in US and in particular for oil.
🧵👇
The carry trade helps smooth out oil shocks. But when Putin - after warning for months Ukraine could never be part of NATO - invaded Ukraine the carry trade wasn't enuf to suppress oil volatility.
Biden tried to smooth the markets by selling off the US strategic petroleum reserve and g7 central banks tried to up the carry trade.