From Barron's, Feb 6:
Investors disenchanted with the VIX and in search of a new risk barometer should look no further than the U.S. dollar, according to Jim Caron, portfolio manager at Morgan Stanley Investment Management.
The VIX volatility index, the Chicago Board Options Exchange's measure of the stock market's volatility expectations, has gotten too technical to give a clean read, Caron says.
Instead, he says, look at the U.S. Dollar Index (ticker: DXY): The dollar weakened over the past year or so as the global economic backdrop improved and investors around the world converted their money from dollars to buy assets, he says.
So if markets have truly entered a risk-off environment -- as it might seem right now -- then those investors would be unwinding their positions, selling assets denominated in emerging market currencies or the euro and buying dollars.
"If there's a big spike in the DXY, then that means people are really going risk-off," he says. "That tells you people are taking risk off and unwinding and moving into cash."...MORE
