Having been told by she-that-knows that low volatility is not a signal of complacency, it appears Citi's Matt King disagrees. Unlike 2004-2007's "virtuous" cycle of low vol begetting low vol, 2013-2014's lower volatility is leading to a decidedly "vicious" circle that will likely not end well for the Fed and the world's central banks' "financial stability" mandates.
The Virtuous circle…
The Vicious circle…
Simply put – it is different this time – Low vol breeds low vol – but not always in the way you want
And bear in mind that markets are entirely disconnected from fundamentals…
This will not end well… (remember what happens in an illiquid market when the HFTs decide to sell)
Source: Citi's Matt King
via Zero Hedge http://ift.tt/1uLSyFc Tyler Durden