The VIX index is going slowly but steadily downwards, and it is now back at pre-Lehman Brothers bankruptcy levels. Quite an interesting sign, since the last time the VIX went down steadily, was in 2003, followed by the boom years fueled by the credit boom.

What the VIX is telling us is that the market expects less surprises in the coming future, hence watching the VIX going down should reassure small investors. In times of trouble and large volatility, hedge funds make money. They have a better feel of what is about to happen, markets are nervous and expecting large variations, and smart traders make loads of money out of it. And the small private investor is left with the problems. We, as a person, want steady returns without large variations. We want to see what we expect. Of course large upsides are pleasant, but large upsides also mean large downsides unfortunately.

With a steady market back on track, it looks like we are going back to the good times. However, a note of caution has to be taken into account. Even with the Fed seeing improvements in the economy, the recovery is still fragile. There are tensions arising between China and the US on the value of the Renminbi, and pressure is never a good thing. That is also probably why the volatility is, in a sense, still so large.

Acquisitions are being launched in every corner of the planet, fueling short trades on the acquirers. Te golden times of Investment bankers in Mergers and Acquisition are back, with big fat cheques being handed out for acquisitions that, in the end, do not make a lot of sense. However, acquisitions cleanse the market, and the economy can go its way in a better environment.

As a conclusion, it is time to watch the markets carefully to be ready to enter investments in equity again, slowly but surely.