Montreal, Canada

JGAM`s ,or Jyske Bank Global Asset Management's, Thomas Fischer is buying the VIX after a big plunge for the fear gauge this year. Fischer, the senior vice-president of the Danish-based JGAM, made a prescient call before on the VIX back in late 2007 – just ahead of the credit collapse in 2008. He told me in November 2007 that he was personally loading-up on the VIX because volatility was just "too cheap." At the time, the VIX traded around 18.

The VIX trade and the opinion thereabout, is expressed solely by Thomas Fischer for his personal account and not by JGAM.

The VIX, or the CBOE Volatility Index, is an options index measuring investor sentiment based on the S&P 500 Index; when investors are bullish the VIX declines and when they're bearish or growing increasingly defensive the index rises. The VIX is commonly regarded as Wall Street's stock market fear gauge.

In 2008, the VIX hit its highest levels this decade at 80.86 before crashing to 20.69 recently. In 2008, the VIX skyrocketed 77.8%. In 2009, the VIX has declined 44% as investors turn to greed and abandon fear. From its low on March 9 the S&P 500 Index has now gained a cumulative 65%.

Thomas Fischer has made some good calls over the years. His investment style is typically contrarian and value-based. He avoids "bubbles" and, on occasion, even shorts securities for his personal account.

Since 2001 I've been a speaker with him at numerous Sovereign Society conferences. Rarely does he make a call on the markets outside of JGAM's views; but, after speaking to him yesterday morning, Thomas is growing cautious on the markets. "We've come a long way. Investors holding a portfolio of stocks at this point should consider downside protection. The VIX is cheap."

The VIX is easiest to play vis-à-vis the iPath S&P 500 VIX Short-Term Futures ETN, symbol VXX. This note, sponsored by Barclays, is highly liquid and tracks the near-term VIX contract.

If you believe we're going to witness a major reversal in stock prices sometime over the next several months – and I certainly do -- then buying the VIX will pay off in spades.

Have a good weekend. See you on Monday.