So they’re calling it the “fear gauge” again. Cute.
Every time some politician tweets in all caps or a bank somewhere in Europe looks wobbly, the talking heads on cable news dust off the CBOE Volatility Index, the VIX, and point to it like it’s some kind of oracle. Look! The number went up! Fear is back! Wall Street is finally waking up!
Give me a break.
Wall Street never sleeps. It just pretends to. The VIX isn’t a gauge of fear; it’s a gauge of how long the market can keep up the charade of stability before something, anything, inevitably snaps. Calling it a “fear gauge” is like calling a seismograph a “surprise gauge.” We live on a fault line. The ground is going to shake. The only real surprise is that anyone is still surprised by it.
If you want a good, dark laugh, just look at the CBOE’s own highlight reel of market meltdowns. It reads like a disaster movie marathon. You’ve got your classics, like the 9/11 attacks, when the VIX jumped 11 points as the world tried to process the unthinkable. Then there's the big-budget sequel, the 2008 Global Financial Crisis, where the VIX shot up a staggering 16.5 points after Lehman Brothers imploded, and the entire financial system stared into the abyss.
But it’s the smaller, almost boutique panics that really tell the story. Remember the 2010 “Flash Crash”? A computer glitch, a single automated sell order, sent the market into a nosedive and the VIX popped nearly 8 points. Or the 2011 hissy fit when S&P downgraded U.S. debt and the VIX rocketed up 16 points because, shocker, our politicians couldn’t agree on how to pay the country’s bills. This is all just… pathetic. These weren't acts of God. They were self-inflicted wounds, born from greed, incompetence, or technological overreach.
This is the market's "check engine" light. But instead of fixing the engine, we've just gotten used to driving with the damn light on. We see it flicker during the "Taper Tantrum" when the Fed so much as hinted at turning off the money printer. We see it flare up when China’s market sneezes, when Britain decides to commit economic self-harm with Brexit, or when a global pandemic shuts down the planet. Offcourse, the VIX is going to spike. What else would it do?
Each event gets its own neat little entry in the history books, a catalyst and a response, as if it were a clean, scientific experiment. But it ain’t science. It's a recurring, predictable pattern of human behavior. It’s the same story, over and over: a period of blissful, low-volatility ignorance, followed by a sudden, violent wake-up call. And we're supposed to just accept that this is...
The most telling part of this whole charade is looking at the more recent “tail events.” Inflation fears in 2022? VIX jumps. A weird “Yen-Carry Unwind” in 2024? VIX jumps. And my personal favorite, a fictional future event they’ve already named: “Liberation Day” in 2025, where a trade war with China sends the VIX soaring 23 points. They’re already writing the script for the next panic, as detailed in CBOE's own VIX® Index Attribution of Notable Tail Events.
This is a bad idea. No, ‘bad’ doesn’t cover it—this is a fundamentally broken way of looking at the world. We’ve institutionalized panic. We’ve created a product, an index, that financializes our own anxiety and then we act shocked when it tells us we’re anxious. Can you imagine the sheer chaos on a trading floor during one of these spikes? The frantic shouting, the sea of red numbers on a thousand monitors, the low hum of servers straining under the weight of a billion sell orders as the VIX number ticks higher and higher—30, 40, 50. It's a theater of manufactured crisis.
What are we even learning from this? That a pandemic that shuts down the global economy is bad for stocks? That a full-blown trade war with the world's second-largest economy might create some uncertainty? These aren't brilliant insights. This is basic cause and effect.
The real question isn't why the VIX spikes. The question is why it ever goes down. Why do we, time and time again, allow ourselves to be lulled into a false sense of security? Is the collective memory of the market really that short? Or is the allure of cheap money and endless growth just too powerful a drug to quit, even when we know the hangover is going to be brutal? Then again, maybe I'm the crazy one for expecting anything different.
Let's stop calling it the VIX. Let's call it what it is: the Gullibility Index. It doesn’t measure fear. It measures the precise moment when the market’s collective fantasy collapses under the weight of reality. A low VIX doesn't mean things are safe. It just means most people are successfully pretending they are. The spikes aren't the story. The quiet periods in between—that’s where the real delusion lives.
