Should people be worried that the “fear gauge” is so low?


This is a chart of the VIX – the “fear gauge” of the title of this blog. It shows that (American) investors are less worried about the markets than at any time since 2012 (actually since the crash). The same story is told by the European version of the index.

I won’t dwell on the imperfections of the Vix (there’s a good article on that linked below) but I’m concerned that we see a lack of worry as a cause of concern!

It is the great cliché of public speaking (especially on financial matters) that we live in “interesting/turbulent/troubled/volatile” times (insert your variant). The primary driver is change – geopolitical, technological, demographic – you name it – it’s “unprecedented”.

These glib clichés are the armour that weak presentations , put on, to convey a sense of experience, world weariness and a nostalgia “for an age yet to come”.

The Buzzcocks reference is worth reminding ourselves about. The geopolitical terror we live under compares to the much wider threats of my youth when aircraft fell out of the sky, the City of London exploded and society was threatened by every looney-tune that could buy a bag of fertilizer. A couple of decades before Europe was in the grip of genocide. The myth of some utopian world that pre-existed ours is a common trait of human nature, but it is a myth nonetheless.

We are not living in a particularly terrorised world, if there was a Vix for terror, I imagine it too would be at record lows.

Why are we terrified of optimism?

Every week Professional Pensions runs its own sentiment question asking readers whether they expect the market to be higher or lower in 6 months time. The bias of the results towards negative outcomes is consistent and marked. When put on the spot, very few people admit to being optimistic about anything – least of all the stock market.

I’m not a behavioural scientist , but even I can see where this leads. It leads to a battening down of the hatches, a restriction on investment into growth assets, an over- allocation to bonds and cash and a reduction in our entrepreneurial instincts as we take the “under the mattress” options.

Why are we terrified of growth? It is so much easier to be right in predicting under-achievement – and we can all participate in under-achievement by sitting on our bums!

Faux-nostalgia and laziness – driving negative behaviour

Of course this is only half the story. The male – stale – grey – pale half of the story. One of the features of the Pension Play Pen lunch (about which Jess wrote so movingly yesterday), is that it is attended by people who have got off their backsides and made an effort. I would be a rich man if I had a (new-style) fiver for every person who has told me he/she’s been meaning to get to one of these lunches.

Those who take the tough choices, whether in running business or in something as simple as attending a lunch, are taking positive and get value from the actions that follow. Those who sit on their backsides and wait are the victims of things going right.

Actually stock markets are at record highs, American politics is showing the self-correcting bias that suggests that extreme ideology will be marginalised. Terrorist activity continues to be marginal to BAU and we are not rioting on the streets as one generation attacks another. We are enjoying our 63rd year of peace in Europe and the world is generally a cleaner, healthier place than it was when I was a child. We are not running out of oil (as my school books told me we would by now) , infact oil prices are low because there are cheaper alternatives.

Reasons to be cheerful

There are always good reasons to be mindful of risk, but we need to put risk in perspective. Yesterday I attended some amazing talks at Accountex 17 on subjects as diverse as making tax digital to the perils of negligence. When Mark Lee spoke of negligence I was inspired to congratulate him – he inspired me to speak on the power of good governance in workplace pensions, not out of fear – but out of delight at doing things right.

I can tell Mark and the other great people I met yesterday that they are making me very cheerful as I prepare for another day in the Docklands!

Here error is all in the not done…

There’s a fine line between optimism and complacency but I think I know where that line is.  It is defined by the magnificent ending to Ezra Pound’s Canto 81

But to have done instead of not doing
this is not vanity
To have, with decency, knocked
That a Blunt should open
To have gathered from the air a live tradition
or from a fine old eye the unconquered flame
This is not vanity.
Here error is all in the not done,
all in the diffidence that faltered . . .

The FT article mentioned at the top of the blog is here

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to Should people be worried that the “fear gauge” is so low?

  1. DaveC says:

    Zirpy nirpy world is a new thing. It’s not happened before.

    Stocks at all time highs again relative to devalued currencies. That’s a new thing.

    No real productive growth anywhere and rampant inflation, stealth or real (stuff on the official list has become cheap tat where possible, early 00s stuff is much better quality)

    Bubbles all over as people run for yields above real zero.

    There is lots to be negative about if you’re young and have none of these expensive assets that you need (a home for example)

    There is lots to be positive about if you’re life savings and pensions are wrapped up in them though.

    We’re both biased in our perspectives.

    But this time *is* different, and the law of unintended consequences will be invoked at some point soon!

    We’ve had a decade of stagflation masked by bollocks official figures and cheap debt.

    Gov debt still north of £1tn and rising.

    The only winners seem to be those who print money for free and lend it at interest.

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