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Volatility Index Indicates Wall Street Is Bored


It's official, Wall Street is bored. Wall Street being Wall Street, there is, of course, a number that measures such things. It's called the Vix. Often people call it the fear index. But the numbers are so low these days, maybe that name doesn't work. Here is David Kestenbaum from our Planet Money team.

DAVID KESTENBAUM, BYLINE: The Vix, technically the volatility index, is calculated by a computer somewhere at the Chicago Board Options Exchange and the number is studied by traders and analysts all over the world.

KESTENBAUM: Who started calling it the fear index?

BOB WHALEY: I did (laughing). That was a term I had coined in one of the papers I had written.

KESTENBAUM: This is Bob Whaley, economist at Vanderbilt University, who invented the thing. The math behind it is a little complicated. But the fear index is basically a measure of how much people are willing to pay for an insurance policy - an insurance policy protecting them from drops in the stock market over the next 30 days. The more worried people are, the more they're willing to pay. During the financial crisis, the fear index, Whaley says, was way, way up at 80.

WHALEY: Right now it's in the 11 range.

KESTENBAUM: Is that low?

WHALEY: It is. It's been lower, but...

KESTENBAUM: Not often.

WHALEY: Not often, no.

KESTENBAUM: What does it mean?

WHALEY: It means that investors are not particularly worried about anything.

KESTENBAUM: In fact, you could say the fear index is measuring something different these days. It's not measuring fear, it's measuring boredom. The stock market has been just chugging along, going up but no dramatic spikes, no crashes. Michael Antonelli is a stock trader at Robert W. Baird and Company. He advises pension funds, foundations, hedge funds. Sometimes, he says, the job is like driving a fast car, changing lanes all the time. This is not one of those times.

MICHAEL ANTONELLI: If you think about our car, we're probably in the right lane going about 10 miles an hour, you know, listening to some Air Supply on our radio. And so really slow, really quiet markets.

KESTENBAUM: In really crazy times, Antonelli finds himself talking on two phones at once. These days, it is definitely one phone. And sometimes he's talking about what was on "Game Of Thrones" last night. The popular conversation is betting which character is going to get killed next.

ANTONELLI: Talking markets, it can be difficult (laughing) because, you know, it was unchanged yesterday, it was unchanged the day before, and it looks like it's going to be unchanged today. You now, that's hard, right? It's hard to come up with something that doesn't - something that doesn't bore your client. You don't want to make a phone call if you have nothing to say.

KESTENBAUM: You could see this all is good news, assign that there are no storms on the horizon. Or you could see the lack of fear as something to fear. Jeff Frankel is an economist at Harvard.

JEFF FRANKEL: If you ask me overall is it good news or bad news, I guess I would say overall, I find it a little troubling.

KESTENBAUM: A little troubling that it's so low, that there's so little fear out there.

FRANKEL: Exactly.

KESTENBAUM: Frankel points out the last time the fear index was this low was right before the financial crisis.

FRANKEL: Just to remind ourselves, everybody was very copacetic before the global financial crisis. There are many who think that the whole problem was that people were overly complacent.

KESTENBAUM: There are lots of things you could be worrying about, he says. The Chinese economy, the situation in Ukraine, maybe there's a bubble building here at home. These days though, a popular topic in the financial press has been the fear index and how low it is. When people are bored, they have plenty of time to think about why they are bored. David Kestenbaum, NPR News.

GREENE: It's MORNING EDITION from NPR News. Transcript provided by NPR, Copyright NPR.

David Kestenbaum is a correspondent for NPR, covering science, energy issues and, most recently, the global economy for NPR's multimedia project Planet Money. David has been a science correspondent for NPR since 1999. He came to journalism the usual way — by getting a Ph.D. in physics first.

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