Godot waiting for volatility

I attended a CBOE seminar on VIX futures which had a strong bias of panelist from the managed futures industry. The talk is that volatility is low but it will be rising soon. This is also what we heard last year and the year before. The managed futures managers who are generally long volatility and divergent traders have seen poor performance because they have been waiting for the increase in volatility which just has not come. We have had some spikes in volatility since the Great Recession, but the trend as been the same, lower. The trade has been to sell VIX futures and ride down the steep contango curve.

I am in the camp that volatility should increase, but it is not going to happen until an event occurs which drives the market to more uncertainty. We have not had that driver and those who are calling for more volatility do not have a story for why it will happen. Hence, there cannot be placed a timing on the event. Price based traders do not have forecast because they only react to prices, so the managed futures traders who look at only price trends will not find the evidence they need. They are living off of hope.  I have that hope too, but you cannot trade that way and make money in the short-run.

Saying the stock market will decline and volatility will increase may not be good enough. There has to be a reason for the decline. To get there, you must have a scenario of recession or policy failure. There has to be a catalyst and right now there is none that seems ready to move the market.