No, not 2008. 2007. It is at the same level it traded last when the S&P hit its all time highs, when stocks moved 10% on a Cramer recommendation, when complacency was virtually infinite, and just before the first quant wipe out of August 2007. That said, the summer of 2007 did not have a politburo of 12 Fed presidents and one Chairman determining every single tick in the Russell 2000. In that regard, this time is truly is different. Expect the VIX of the policy instrument now known as the stock market, to hit 0 as vol in FX, rates and commodities approaches asymptote.
Keep in mind, a VIX of about 15 is needed for the swaption market to function, which means that if PDs are making enough money on swaptions, they will be more than happy to create a little mini crisis and get the VIX right back up. On the other hand, what need is there for a high VIX and the expensive insurance, when Uncle Ben holds all the insurance policies on our behalf? After AIG soon to be successful emergence and its resumption of selling infinite CDS, what can possibly go wrong?
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