The VIX is the Chicago Board of Options (CBOE) Volatility Index, and regardless of what it was intended to do, what it does do is offer a measure of investor fear and loathing. The higher the number, the more the investor is freaking out over any number of today’s global maladies.  For some perspective, in the calm before the storm, it traded in the low 20’s. During the Bear Stearns funding crisis of March 2008, it hit 32.24. When the issue of placing Fannie and Freddie into receivership hit the New York Times in July 2008, it hit 28.54. After the Lehman bankruptcy, 31.70. It traded above 40 pretty consistently for the entire fourth quarter of 2008. This morning, the VIX traded above 40.

Here is where we credit Murray Stahl of Contrarian Research for the idea and the quote.

One of the differences between then and now is that until the 2008 crisis was upon us, at least as expressed in the options world, the market didn’t believe a crisis of such severity could actually occur. It only believed it when it did occur. Now, the market doesn’t really know whether or not a crisis of like severity will occur. It simply assumes that is occurring, even though it has yet to occur and perhaps will never occur. It is a very salient difference.