World markets crater. US markets not panicked

Weird. Asia and Europe markets got clobbered last night. Many investors were expecting US markets to do the same, but so far they are holding steady, down 4-5%, but not down 9.6% like the Nikkei was.

Strange days when being down 4% is considered to be not extreme. The poster child of the day for dysfunctional countries is Hungary. Their currency is collapsing. Russia just had their debt downgraded and default is not out of the question. Massive amounts of credit default swaps have been written on Russian and emerging market debt so the fallout from this could (and probably will) hit most anywhere.

The California Public Employees’ Retirement System (Calpers) is down 20% so far this year, having lost $50 billion in value. Yikes. No doubt other pension funds have similar losses.

The VIX is a volatility indicator that basically measures fear in the markets. Ordinarily, when a market has been down big and the VIX hits 30, it signals a reversal is coming. In extreme cases, it might have to hit 40-45 before than happens. Well, the VIX has been between 55-96 for all of this month and it could hit the triple digits soon.

Nouriel “Dr. Doom” Roubini explains in this 47 minute talk on Bloomberg why the worst is yet to come.

We are in uncharted territory.