What I Learned This Week

The end of the low-volatility regime: Why the "VIX tantrum" may be only a minor blip compared to the algorithmic turbulence yet to come.

As John Authers wrote for The Financial Times last Friday: “The violence of the move on the basis of still skimpy evidence…does suggest something strange is afoot. That raises questions about the machinery. Are market structures still in good working order after years in which volatility was suppressed?” The Dow fell 700 points in 20 minutes. It took only nine trading days for the S&P to lose 10% of its value—it has never fallen so far so fast from a record high. And automatic selling triggered by the turmoil added up to more than $200 billion, according to the FT. In these pages, we have time and again warned about how the lowest interest rates in 5,000 years had generated a toxic co-…

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