This article isn't exactly aimed at retail investors, but it's an interesting view: volatility is increasing, and in an increasingly volatile world, safe bets may do worse than an assortment of risky bets.
I'm curious what the stackers think of rhis?.
What we’re interested in is not “is the VIX increasing over time” but rather “are the spikes of the VIX getting bigger, and more frequent”. When you fatten the tails in a distribution, you decrease the frequency of small-scale volatility and increase the outliers. The term we use for measuring this fatness is kurtosis. Looking at the kurtosis of SPY’s price action over an annualised window, you’ll see a small and steady increase since 2007.
We’re interested not in how volatile the index is, but how volatile it’s volatility (vol-of-vol) is. Vol-of-vol is not quite the same as kurtosis, but it’s a good enough proxy for us. The index for this - the VVIX - has data from 2006 onwards. Looking at the VVIX, there’s a bunch of noise but again we’ve got a small uptrend over the same timeframe.
The most blatant area this extremity shows up is the SKEW index which measures the market expectations for ‘tail risk’ using the implied volatility of out-of-the-money (OTM) strikes for the S&P 500.
Venture’s not a hedge. If you want to hedge negative tail risk, buy puts or gold.
Increased vol-of-vol means increased surface area for path dependant outcomes. Things compound faster, and yes the money printer has given us fatter tails and a bigger power law. Think of COVID pulling forward retail trading demand. Or the GFC for trustless money. Or bank runs (SVB) for stablecoin infrastructure. Or the transformer paper for app layer startups. Each of these represents a discontinuous shift where the “sure bet” incumbents were poorly positioned, and the variance (outliers) captured disproportionate value. These aren’t predictable trends but regime changes that invalidate previous assumptions and create winner-take-most dynamics for adapted solutions.