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When Everyone Else Is Selling, Of Course And Why Buying Bonds Can Be Even Better
This is Porter’s Daily Journal, a free e-letter from Porter & Co. that provides unfiltered insights on markets, the economy, and life to help readers become better investors. It includes weekday editions and two weekend editions… and is free to all subscribers.
We might be on the verge of a market panic… Watch the VIX to know when to buy great stocks… Why bond investors can make more than stock investors during market panics… China fights tariffs with bigger government deficits… |
Table of Contents
Can you feel the market beginning to “roll over”?
I can. Seems like we’re on the verge of a market panic to me. And, if you’re waiting for a good time to buy, you keep your eye on the VIX (CBOE Volatility Index).
This is an index that measures the risk premium embedded in the pricing of put options. (Put options are leveraged investments betting that stocks will decline). You’ll notice that when the VIX goes above about 30 or so, it’s usually a very good time to buy high-quality stocks.
The St. Louis Federal Reserve tracks the index on its website, going back all the way to 1990.
One good strategy to use is simply to stockpile cash (and investment ideas) until the VIX crosses 30. Then deploy your capital into the market. It’s hard to be patient, but there will always be opportunities to buy. During my career (which began in 1996) notable opportunities to buy high-quality stocks by using the volatility indicator occurred in: 1997, 1998, 2001, 2002, 2008, 2011, 2015, 2018, 2020, and 2022.
That’s roughly one opportunity every three years. And you’ll notice the last such opportunity occurred almost three years ago (hint).