October 20th, 2008
10:03 AM GMT
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LONDON, England - By the close of trading last Friday, several major markets had gains for the week. But wow, what a ride!

The bank rescue plan announced by governments helped to restore some confidence, but it's clear investors remain incredibly nervous. The volatility has been eye popping, but investors hope to build on the gains.

For anyone invested in these markets, watching it has been a gut-wrenching experience. Let me give you some examples.

Here in Europe, the Dow Jones Stoxx 600 index surged 13 percent in the first two trading days of last week, and then posted its biggest two day fall since 1987. The United States saw a more than 900 point gain for the Dow on October 13 and two days later it crashed more than 700points.

On Friday the S&P 500 swung between losses and gains at least 28 times. It was tenth consecutive session when the S&P had swings of more than 5 percent between the low and the high of the day.

That's much higher than the average this year of 2.2 percent. Last year the daily swings between the high and low was just 1.2 percent and 0.8 percent in 2006, according to Bloomberg. The S&P is now heading for its most volatile October since 1929.

What is this volatility telling us? I think it reflects the incredible uncertainty about the financial health of a number of companies facing what seems to certain be a global recession, and lingering concerns about the banking sector and access to credit.

As I mentioned in my last blog, I don't know if the worst is over for the markets. Opinion remains divided on that.

The economic data remains terrible, and that isn't going to change anytime soon. The question is how much bad economic news is already discounted by investors. The debate over that is adding to market volatility.

Tell me what you think. Do you agree the volatility is going to continue? What's that volatility telling us? How long do you think the volatility could last? Do you have the stomach to buy into these volatile markets?



soundoff (73 Responses)
  1. gatkin09

    Todd,

    Let's face it, none of us have any idea what will happen with the markets over the next few months. History tells us that the markets will bottom, things will get fixed and eventually another bull market will come along. However the volatility tells us that people are nervous and it is hard to predict what nervous people will do. Until confidence creeps back I see no end to the volatility.

    Cheers,

    Greg Atkinson
    http://www.shareswatch.com.au/blog

    October 20, 2008 at 1:34 pm |
  2. Prajwal Tuladhar

    I think volatility will continue to exist because it is still not clear that the financial bailout going around the globe would be effective enough or not. But the government led bailouts were inevitable and I am optimistic that it will help the market and investor to get some confidence back.

    October 20, 2008 at 2:58 pm |
  3. E.C.

    Your guess is as good as mine. But for the record I say yes.

    October 20, 2008 at 5:40 pm |
  4. Ranjit Jatar

    Volatility in the western world markets will continue till worries reduce about a financial crisis. And then the winter of recession will set in. A real cold winter where stock markets will be low and placid. At the other end of the planet, in countries like India not dependent on exports( unlike China) , "recession' will mean a slowing of GDP growth from 9% to 6-7 %. Extrapolate that for scale on 1 bn people and you will see EPS growth prospects causing a rush of capital into emerging markets like India. I anticipate this to happen after Dec when FIIs and hedge funds lick their wounds and book profits( or losses) at the year end, after which decisions on geographical allocations of funds will need to be made.

    Incidentally, no one in the western world has had the time to analyse that in a country like India, there are no toxic assets with banks even though housing prices grew as rapidly as in the US since 2002. No bank failures. Banks well capitalised - all of them.Perhaps if an Economist does a study of how "Indian capitalism" has survived , there could be lessons for the western world - and perhaps a Nobel prize opportunity for that Economist.

    October 20, 2008 at 5:58 pm |
  5. forexthinker.com

    The volatility is there because there is no fundamental news and a clear trend that can give the market direction. Investors trading the market would like to hold the stock they bought at these bargain levels for longer periods. However, the uncertainty you talked about make them sell soon after they find an opportunity to make a small profit, or sell with a small loss if the market is going against their positions. The same applies for short sellers.
    As to your question regarding one having a stomach to buy into these markets, the answer is yes. Short term traders are buying and selling.

    October 20, 2008 at 7:52 pm |
  6. d. griffith

    Volatility will cease when they start spreading the wealth around, from the $700B bailout, to main street and poor street.

    October 21, 2008 at 4:33 am |
  7. leon amram

    Unless the US stops funding and fighting the Iraq war, all positive, upward trends in the economy will be temporary and cosmetic. The US is undergoing the same type of change Britain went through at the end of WW1 where it had to let go of all of its imperialistic commitments. The US has to realize it is not the sole power anymore but shares power with Europe, Japan and some powerful developing countries. Therefore, the status of the US Dollar has to be realigned with this reality. A world bank with the power to hold a gold standard – like adjustable currency position built with the leading currencies need to be formed. All major prices need to be quoted with this new currency and local currencies pegged to this standard. This bank also needs to be able to fund national economies with long term bond sales. The world has long abandoned wars to obtain an upper hand in international politics and should also abandon the search for a leading nation or nations in international politics. It is the time to understand that, like in business, development comes only with cooperation and not even through subtle power. The world has been transformed by business and political leaders have been left behind.

    October 21, 2008 at 8:41 am |
  8. Paul Harris

    Sorry to sound spooky but I wonder if anyone remembers Osama Bin Laden's threat? Here is a quotation which I find to be pretty scarey. The subprime/credit default swaps crisis seems to be helping his plans:
    “Michael Scheuer, who served the CIA for 11 years and was head of the agency’s Osama Bin Laden unit,” predicts “ that Al Qaeda” intends to “‘stir the troubled pot of oil-related international worries’ and thereby increase pessimism about the price of oil and the dependability of oil supplies.… Scheuer said Bin Laden’s intention is to bankrupt the US economy.”.
    All we need now is to see a run on the dollar and then the world's in big trouble.

    October 21, 2008 at 9:57 am |
  9. Sam in Spain

    The more volatility there is the better, WHY? I am currently investing (not for me – too old and a pensioner) but for my younger wife. Although the Portfolio of shares in Unit Trusts are down, there is funding every month therefore obtaining more and more units which in due course should??? produce substantial profits within the 10 year period (if the fund managers do a good job). I would recommend that others should do the same if they are young enough and are saving.

    Long retired Financial advisor

    October 21, 2008 at 10:26 am |
  10. James

    If you're not sure what's going on or only sure of the obvious, why are you writing a column?

    October 21, 2008 at 11:41 am |
  11. Bhushan

    It will remian for sure..

    October 21, 2008 at 12:47 pm |
  12. Mohammed Allam

    Well What I see these days is that Smart Money have in creased their trading share out of total market ... and prices are really low these days... which means that probably they are collecting stocks these days... but for them to collect stocks without putting large demand... market fluctautions must occur so that individuals get afraid and sell their stocks... and @ the end of the day individuals sell with losses and smart money buy these stocks for a nickle... and a year from now... smart money will be selling their (nickle stocks) and gaining lots of profits... it's how the business game works... these bad news are just part of da game

    October 21, 2008 at 1:57 pm |
  13. vineet

    Tell me what you think.
    Do you agree the volatility is going to continue?
    YES
    What’s that volatility telling us?
    LOST OF CONFIDENCE
    How long do you think the volatility could last?
    ONE YEAR
    Do you have the stomach to buy into these volatile markets?
    NO, I WAIT AND WATCH.

    October 21, 2008 at 2:04 pm |
  14. Darlene Ferguson

    Unless God builds the house it is built in vane. As I have said before, the greed of this united states led to one world government. This is not what the Lord wanted, but who checks with him anymore? This is the reason for the fall and decline of our country. We have been in a spiritual world war three and the country doesn't even recognize it. Look around, famine, pestelence, houses tore up, tonados, floods, earth quakes, we have need for our own country to be rebuilt and all we are doing is rebuilding other countries as we fight against the wrong targets. God bless america, that is all .

    October 21, 2008 at 3:43 pm |
  15. Dharmesh Sanghani

    Till such time Fed and central banks cotinue playing around with interest rates and Libor and continue to inject momentum by offering stimulus packages the volatility will continue as they are not letting the markets and the interest rates to settle down to realistic levels. We are still to see more nasty volatility after elections.

    October 21, 2008 at 5:51 pm |
  16. Gene

    Market volatility will continue until confidence in the global economy improves. The world is watching for signs of an upturn in the U.S. economy, but this is not going to happen until consumer spending and job creation, in the least case, begins to increase. I do not believe this will happen until Washington realizes the true roots of the problems and develops concrete plans for correcting those issues. Based on the current plans in Congress and the Senate regarding the next great economic package, I get the impression that are either in denial about the true causes of the current economic climate or lack the expertise required to understand and correct the situation. Spending money on infrastructure is a poor solution. It will generate jobs over the short term and shound be considered a short-term solution. However, long-term solutions are required to move us back into a state of continuing growth. Focusing money in a venture capitalist fashion on new innovative technologies and research that could produce massive numbers of jobs might be a better solution to get the ball rolling again.

    Thus far, only Obama has hinted at the cause of the problem, but with no expansive clear cut solutions for working us out of this mess. He has suggested a many ideas that might help. McCain appears to be in La-La land at this point and I was hoping to see much more vision from him on the underlying issues causing the problems. We need folks with a strong understanding of the current and future technologies that can produce massive numbers of jobs in Washington. I do not see this happening anytime soon largely because government in general prefers to stay out of those matters. However, a strong understanding of technology might lead to the development of programs or grants to steer us back in the right direction.

    October 21, 2008 at 9:03 pm |
  17. FromEuroZone

    Dow is now 8'500-9'500 range. Next set of real-economical indicators are expected in early November. So, the stocks probably creep upwards next weeks, only to be crushed again when numbers are worse than expected. And indicators probably are worse than expected, as the almost-meltdown of Wall Street, which scared everyone, will be affecting them fully. It is feeling based game now. Optimism will battle realism and crushing pessimism and stock values are determined more by hope and fear than actual earnings or profits.

    This kind of volatility is not a good thing as prolonged uncertainty with multiple disappointments will make people even more pessimistic than reality demands.

    October 22, 2008 at 1:15 am |
  18. Geraldine Donnelan

    Since the Feds own the banks what will happen after a change if Government come January .and with Obama friends will we be safe

    October 22, 2008 at 5:59 am |
  19. Peter Millar

    It is generally concedes that the present problem was caused by the western world living beyond their means.
    I,E Wanting housese they could not afford on their wages.
    Borrowing sums they could not repay .

    The wworst offenders were thise in the financial markets who gamblted on the stock markets. Selling stock that they did not at that moment own.
    Buying stock withiout paying for it adn gambling that the price would go up and they could sell, pay then and pocket the profit.

    It is to be hoped that changes will be brought in to eliminate these practices and all forms of gambling with investors money.

    October 22, 2008 at 8:04 am |
  20. Peter Kramer

    The credit crisis is slowly getting resolved now that most Western countries, at least, have made enormous sums of money available to both banks and private industry. Only a few weeks ago, especially the latter would have been considered unfair competition. As long as there is no international agreement on what is NOW to be considered fair competition, governments will keep rushing to give their own country's industry a little (or not so little) edge. In this jungle, it is difficult to predict which countries make the best moves, which companies, thanks to unfair competition, will win out, and which will have to pay the price. Clearly, in this political climate, volatility cannot but continue.

    As an example, consider the Dutch government's decision to support all small private enterprises with loan guarantees. It is not clear how much this might end up costing the Dutch state (volatility source 1), but it is clear that this cannot but affect the market (volatility source 2).

    October 22, 2008 at 1:11 pm |
  21. Nicholas LiBretto

    If investment firms have been buying stocks with a 20-30 to 1
    leverage in the US. Is the Dow Jones Industrial only worth it's
    high point divide by 20? 10,000/20=500 points ? What percentage
    of stocks are bought on leverage?

    Shouldn't these guys be charge with securities fraud?

    October 22, 2008 at 3:19 pm |
  22. Srikanth Chandrasekaran

    Markets always attempt to discount the future and thats what it is trying right now. Unfortunately, the future itself is so hazy and no one can predict anything even for the short term. The minute there is some certainty about the macro economic picture and also micro level corporate prospects ,they will find their bottom and thereafter settle into a range. Until then volatility is bound to be high. Heightened volatility levels are only reflective of the confusion of market participants.

    October 22, 2008 at 3:32 pm |
  23. Rohan Sandeep D'souza

    The best way to look at future is to take a few lessons from the past. If you look at failures of investment banks you have very clear answers in 'Long Term Captial' (1998) collapse that happened a decade earlier. If you look at the sub prime collapse the real thing was known pretty clearly by end of 2006 but it somehow took lot of time to mature.

    If we begin with question of volatility in the market, we have to just go through previous disasters and learn how quickly people made up thier mind that everything was okay and they could start spending again. I think this is a period of consolidation, the bigger the fall the larger the consolidation. It will take some time of carefullness, care and actual results before greed returns :)

    October 22, 2008 at 3:47 pm |
  24. michael

    Fears of recesion.....

    It just looks that is just fear....

    Confidence is like a palm tree... takes long time to grow, and it is lost at the speed of a falling coconut. But in economy, it is not lost for ever as virginity, it can be rebuilt. The coconut can grow again and with roots, it will turn back very fast.

    Be optimist, and markets will recover.

    October 22, 2008 at 3:49 pm |
  25. Fatman

    Volatility? What volatility?

    This is our now normal free-fall. Better get used to it and enjoy the good times while they last.

    Things are bound to get worse, much, much worse...

    Cheers

    October 22, 2008 at 3:54 pm |
  26. Debesh

    All the fools who ruled the market became fools as they dragged a commoner by his horn ......and now coommoner got more wiser, but he would let the market grapple its glory and the saying goes......... Wisdom prevails at the end of the day.

    October 22, 2008 at 4:17 pm |
  27. Henry E Salum

    The current economic crisis is more severe than Washington and our political leaders want to acknowledge. Despite overwhelming evidence that the current recession is a result of a mortgage debt crisis that has spread across our entire financial system, causing a liquidity crunch, they refuse to confront the mortgage cancer that’s reaching an epidemic stage. Politicians continue to provide relief from the top down, with programs that will not benefit the consumer and address the root of the mortgage issue.

    Any bailout plan must include, as a minimum, funds appropriated to absorb negative mortgage equity, foreclosure relief, funding SBA to provide short term capital to small businesses and other financial incentives, which will benefit all taxpayers. Below are just a few examples, actual cases, where the consumer is being forced to default, due to no other option, to address their financial problems.

    BORROWER A, purchased a home in the last five (5) years with an adjustable rate or balloon mortgage payment and is paying their mortgage on time but is unable to refinance.
    Borrowers who want to refinance their non-FHA loan and qualify as a fully documented loan, with proof of income, excellent credit and the monthly mortgage payment that will include escrows are being turned down based on the current appraisal value and their loan balance. If this same borrower had purchased this loan with an FHA program, they will be able to refinance without an appraisal provided that their monthly payment would drop at least, $50.00. If the banks have these loans already on the books and they are performing, why not refinance without an appraisal. The government could use the $300 BILLION dollar program as insurance funds to guarantee the negative balance to the banks, in the possible event of a loss. In addition, all FHA loans carry an upfront mortgage insurance premium that’s financed into the loan amount and these funds could also be added to the insurance fund. The banks will not need additional write downs, which will lead to raising more capital.

    On a daily basis, qualifying borrowers are being turned down from being able to refinance their property due to declining property values. What are the homeowners left with? Walking away from their homes and increasing the foreclosure problems, losses for the banks and more bailout money from the taxpayers.

    BORROWER B is currently experiencing financial difficulties due to losing employment, reduced income, health issues or other unforeseeable circumstances and is currently in arrears on the mortgage payment.
    Many legitimate homeowners are facing difficult financial stress and are in arrears on their mortgage payment. Some have not reached the ninety (90) day delinquency time frame and others are already facing foreclosure. The bail out program must include funds for these homeowners to avoid losing their primary residence and curtail the foreclosure epidemic. Since Freddie, Fannie and FHA are government owned, use the 300 Billion dollar HOPE Program funds as insurance funds to guarantee the negative balances to the mortgage lenders and banks in the possible event of a loss. These loans should carry a fixed rate of 3% for the first 7 years of the loans, with a 50 year amortization, adding all closing costs and payments in arrears to the new loan balance. The borrowers will need to qualify as a fully documented loan and prove repayment ability to make the new mortgage payments. Throughout the course of the seven (7) years, the borrower’s situation should improve or they could sell the house in a better real estate market. After the 7th year, the borrower’s loan will automatically convert to a 30 year amortization with a fixed rate based on the current mortgage interest rates at the time of conversion, which have historically been relatively stable and low. These loans would carry the same mortgage insurance premium that’s financed into the loan amount and added to the insurance funds.

    We can assist these primary homeowners through these difficult financial times, reduce foreclosures, maintain taxpayers in their primary homes, reduce bank write downs on bad loans and the need to raise capital at taxpayers’ expense and above all, return a profitable performing asset to the bank books.

    Banks, Wholesale Lenders and Investors are making their own individual amendments to FHA guidelines on credit, penalizing borrowers with low scores and many, not even offering FHA loans.
    FHA is basically an insurance company. When the originating bank or mortgage lender underwrites and approves an FHA loan under FHA established guidelines, the loan is insured for any losses, up to 97% of the loan balance (some restrictions do apply). What is now happening is that major banks are amending the FHA guidelines, in reference to credit scores and pricing which diminish the number of homeowners who would qualify. These banks and investors are making Washington’s efforts pointless. Just because the FHA program is available and possible, the banks and investors are not purchasing or approving these loans. Banks are opening their arms to taxpayers’ money yet ignoring FHA guidelines. The government must mandate that all FHA approved lenders including banks, adhere to FHA guidelines in its entirety, without amendments or pricing exceptions. Not doing this, is discriminating and contributing to the mortgage crisis.

    Banks, Mortgage Insurance Companies (MI Companies) redlining some states like Florida, mortgage programs, types of loans, black listing projects or entire neighborhoods.
    Major banks and mortgage insurance companies have black listed certain states, like Florida. Some banks have stopped selling mortgage products in Florida for condos, second homes and/or investment properties. Mortgage insurance companies have stopped insuring condos, investment properties and second home loans.
    Government owned Fannie and Freddie must implement a mortgage insurance system similar to FHA, which will take the place of the MI companies that are contributing to the mortgage crisis by not insuring certain loans.

    HOPE FHA Program
    FHA is and continues to be an excellent loan program for borrowers to purchase and/or refinance their primary residence. The HOPE program by FHA to save your home is facing major resistance from all lenders. Basically, the program states that FHA will assist the borrower in refinancing their primary residence, up to 90% of the current appraisal value, with some conditions. The current mortgage holder will have to take a loss on the difference from the current loan balanced to 90% of the new appraisal value. This is why most banks are resistant to market this program. They will need to take additional losses and raise more capital. Any business owner will understand the banks position on this issue.

    The real threat to our economy is no longer inflation or the credit crunch, it is deflation. Consumers might feel happy and content with lowering home prices due to the current credit crash, yet deflation is the worst enemy of any economy.

    As prices start to drop in all sectors of the economy due to a lack of demand, they can go well below the cost to produce products. The companies start to lay off workers which cuts demand more and the downward spiral, spirals out of control.

    This is what has begun to happen in the housing industry with foreclosures increasing and lender’s selling properties below cost. Soon this same scenario will spread to other sectors of the economy. Prices for gas and homes are falling due to very weak demand, a reality of a global recession, not a recovery.

    Appropriating funds directly to these financial issues, a government funded entity, to purchase all troubled assets from our financial system and helping small businesses through government funded SBA loans, will provide a major stimulus boost to our economy, directly benefiting all tax payers.

    We must avoid these financial illnesses which symptoms have already been displayed and mandate that our political leaders implement these and other financial remedies to avert a prolonged recession and worsened deflation.

    October 22, 2008 at 4:27 pm |
  28. william Cole

    Yes it's volatile. But only so for those who trade short term for a quick buck. Get in now, sit on your stocks and wait. If everyone had that attitude there wouldn't be such volatility. Just make sure you buy a company with a very good balance sheet.

    If everyone would stop talking recession and just agree that we ARE in one, we can just move on. It's the THREAT that's causing the panic. Remove the threat by stating the obvious – recession is already here. Now shut up and buy stocks.

    October 22, 2008 at 4:27 pm |
  29. John Nicholas

    When the dust has settled, say 12 months time, people will again be able to study the fundamentals of industry sectors and individual companies. That will be the reason for a reduction in volatility. Meanwhile, some big fundamentals need to play out:
    * supply and price of oil, alternatives, commodities and industrial metals (remember them?) when the demand destruction has eased (at what level?)
    * how far will China retreat? (If Chinese growth falls to 2-3% or less we have a paradigm shift.)
    What are the values of sectors and solid companies in a zero-growth world? Which sectors and companies will thrive in such a world?

    October 22, 2008 at 4:33 pm |
  30. anthony

    Watch the auto industry. If it goes under, massive unemployment will eventuate and the recession gets a lot deeper and more protracted. Until clearer signs emerge and until the next President-elect takes office, the US market can be expected to be volatile.

    October 22, 2008 at 4:44 pm |
  31. Robert from Poland

    One time in the life of one person such a situation happens. I mean the collaps of some too greedy business people and the beginning of new riches. IT CAN BE THE PIVOTAL POINT FOR THOSE WHO HAVE THE STOMACK TO INVEST AND CHOOSE GOOD MOMENT AND A SECTOR.

    October 22, 2008 at 7:03 pm |
  32. hans

    can anybody tell me what is going on in Bolivia? The bolivian Peso is strong, ,so it seems and is holding on its rate for weeks now. Is this due to the dictator/socialistic government they are having there? Perhaps we should get a little bit acquainted with their system.

    October 22, 2008 at 8:16 pm |
  33. rex

    Joe the plumber : Will the markets be up or down tomorrow ?

    Paulson : YES !

    October 22, 2008 at 10:56 pm |
  34. Ramaswamy Venkataraman

    The measures being taken by the governments all over the world may help us to get over the current economic crisis, but these measures will lead to another crisis within the next ten years unless we fix the cause of the problem, which is the excessive public debt. We change the interest rate to control inflation. In addition, we need to fix a limit on ratio of the public debt to the GDP of a nation. As the public debt rises, the amount of money, that banks should deposit with the reserve bank or equivalent, must be increased so that there is gradual reduction in liquidity.

    For many of the developing countries, the black economy is a big problem. It is possible to do away with paper currency and credit cards with a single smart card for each person. This can reduce the loop holes that a person finds to avoid paying tax. It is possible to extend the use of smart card to all financial transactions to reduce the effect of money laundering.

    In addition, there is gross inequality in the we reward persons. Some persons are grossly overpaid for what they do. Speculation and hoarding are richly rewarded. We need to have a closer look at wealth tax and capital gains tax to reduce the inequality. I am not talking about socialism. All I am saying is that it is necessary to re-define capitalism. Spreading the wealth around can also lead to more demand for goods and more jobs. This concept was the main reason for developed nations to promote inter-national globalized economy.

    When will the leaders realize that we cannot have growth in economy all the time? We need to concentrate on sustainable economy.

    October 22, 2008 at 11:15 pm |
  35. John Vorwald

    Volatility will continue as the world reevaluates the value of US. Since 1997, technology has been dominated by increased telecommunications and internet. While these increases improve the planning / evaluation of production (reducing cost, increasing profit), they have provided limited value in the final product. I think we need to compare ourselves to somewhere to the start of the internet/housing booms, and the revaluation will be based on that comparison. The internet boom started around 1993, when dow was around 4000. Estimate the value added by internet and telecommunications as 15 to 20%, and the current value of the dow is probably around 4700. We will experience increased volatility till reaching those levels.

    Current fiscal solutions are focused in the financial industry, which redistribute the available resources. I believe this approach will be ineffective, and effective solutions will eventually be implemented which focus in revitalizing the agricultural, mining, and manufacturing industries that produce resources. The misalignment of implemented vs effective solutions will contribute to the volatility and decline.

    Unfortunately, we are governed by "take charge and act" leadership, vs evaluate, quantify, and implement leadership. The current election process promotes the "take charge and act" mentality, which will process control mentality. That's partially due to the structure of news / information distribution system.

    October 23, 2008 at 12:00 am |
  36. rob in OZ

    Share market volatility will continue – even with an easing in credit availability – so long as the world believes a global recession is imminent and that world leaders are incapable of stopping it.

    The world doesn't believe that a junior senator from Illinois or an ex fighter pilot from Arizona can fix it.

    October 23, 2008 at 1:45 am |
  37. robertr

    Ask what if. I think the market's going to bottom out at 7200. And gas at the pump will drop to 2.48 by the first of the year. New regulations on credit, medical insurance and labor will set the tone. Infastructure, utilities, and a new type of labor friendly corporate structure will be born from this. Co-chair CEO systems will emerge, with built in checks and balances that will run highly profitable indusrties of the future. Low cost energy, transport and data distribution will be the keys. But still lets all brace for a long hard winter. By next summer this will be all over with, promise.

    October 23, 2008 at 3:50 am |
  38. Andreas, Sweden

    When volumes are low the effects of electronic algorithmic trading can create vicious movements. I would not read too much into this right now because it can be triggered by a multitude of different market nonrelated reasons. I actually expect daytraders to start dominating soon and we could be in for a season of 85%+ vix sessions once most funds have exited for corporate bonds instead.

    October 23, 2008 at 5:39 am |
  39. Umar Fahim Khan, from Pakistan

    Volatility is here to stay unless the Fed ends its endeavors to artificially lift the markets upwards. They must let the market find its bottom by natural means. One day of an artificially induced surge causes a week of destructive declines that only fuel the flight of confidence from the market and takes the prospective natural bottom further downwards.

    October 23, 2008 at 6:02 am |
  40. Debesh

    All the fools who ruled the market became fools as they dragged a commoner by his horn ……and now coommoner got more wiser, but he would let the market grapple its glory and the saying goes……… Wisdom prevails at the end of the day.

    October 23, 2008 at 6:06 am |
  41. Magnaverde

    It is evident that further manipulation won't hold up short term stock markets. It is also evident that the DOLLAR won't stay high (read connected to oilprices) as the American national DEBT is growing by the minute!!!! THINK ABOUT THIS!
    What should happen : release the dollar-oil index and create a new GLOBAL (based on average value of several currencies/basket)
    GOLD we cannot eat, so we have to facilitate daily production & alimentaries as we are used to...
    A last note: Nationalize all banks if they are REFUSING to act on the BAIL-out programs provided by governmental banks! Just to save this world!!!!! Do what has to be done to keep the world turning, and: stop shorts on the markets for ever:regulate volatility by software!!!!!!!!

    October 23, 2008 at 1:22 pm |
  42. Mike Chase

    Mr. Benjamin,

    The volatility of the equities market is only a symptom of the uncertainty of the overall financial markets. The real question is what is going to happen to the world's currencies. The viability of the world financial system is in jeopardy. The dollar has recovered probably not because of the real strength of the US Financial system, but in spite of it. Questionable as the viability of the dollar is, it is better than the alternatives. At least a part of the dollars strength reflects the weakness of the Euro.

    It is hardly surprising that the equity markets are in disarray when the world financial system teeters above a precipice. Against this background anyone that expect anything except further volatility is living in a dream world. Sure wish I knew where that world was so I could join them.

    Mike

    October 23, 2008 at 2:17 pm |
  43. imran

    Its intresting to read comments on the increasesd volatilty and the impacts on the financial instruments. I feel that the most of the market participants have no clue whats in store for them as there is no confidence that the mistakes that has led to this debacle in the financial markets is identified and the regulatory framework to tackel that monster is not only vigilant but proactively acting. Once this confidence is restored we might have an idea where we stand .The way I see going forward is incresed volitilty adding to the woes of the financial systems all over the world.

    October 23, 2008 at 2:42 pm |
  44. George

    However serious the global economy can happen, the most important immediate remedy each country's leader should address is to quickly lower the cost of basic food items, provide sufficient jobs to reduce rising unemployment rate and provide aids for retrenched workers by providing soft loans in the form of basic needs like food and subsidised utility bills. Major expenditure on infrastructures, upgrading of weapons should halt immediately and diverse these spending on the citizens who are in dire needs. These actions must be taken seriously and swiftly as I foresee that civil unrest will crop up and create more chaos. It will just happen on a single nation and the chaos will spread like wild fire world wide. Hunger knows no law!!!

    October 23, 2008 at 4:45 pm |
  45. Pedro Remedios

    I think the volatility will continue only because investors buy and sell stocks based on the company earnings! And with the Christmas sales forecast on the negative side, investors will probably sell more stock as a result. But what investors should have been doing is buying and selling stocks based on the company itself as one of the criteria.

    But investors also sell stocks out of greed and that sends a false message to the company that they are not performing well and that reflects negatively on the index. So investors can help slow or lessen the volatility.

    The governments must also help by implementing sound recovery plans.

    October 23, 2008 at 7:24 pm |
  46. Victor

    Over the lase two months not much has changed except for an increase in volutility in the share market. I believe that government intervention merely caused more unstability in the financial markets leading to more confusion among the citizens of the world. This in turn is making politicians more nervous because finally their ability to govern is being questioned and they don't have any answers.

    You know the saying, "you can fool some of the people some ...."; now think of the reverse, 'you can satisfy some of the people some of the time but you cannot satisfy all of the people all of the time'. In essence this is what is happening because fear has gripped the masses; if this holds true then the concept of democracy and equality is in question. Take a little time out to seriously consider what caused the French, Russian and Chinese revolution. When all avenues of pacifying the population fails people will resort to violence because their 'rice bowl' has been broken.

    Today the German government has asked bank execs to return their bonuses and should this fail to come to pass they (the bank execs) will face a lynch mob.

    All interesting stuff. Hang in there mate, it's looking like a rough ride but the world is coming to an end, yet.

    October 23, 2008 at 8:22 pm |
  47. shuja

    let the economy take its own course . Let all the banks take losses let all the bad eggs demise the strongest one survive . Let all those ignorant people loose their houses in foreclosure. Let all the people who are going to loose their houses because of loss of jobs loose their houses. Reestablish credit rating system . Make the system fool proof. . After every thing is said and done let the business get a tax credit . Pass a law that says people who might have lost their homes between 2006- 2009 can qualify for government backed secured loans if they do not owe a car payment or credit card payment.

    October 24, 2008 at 1:20 am |
  48. Uma in Liverpool, UK

    Stupid word for it: 'volatility'. Entirely the wrong chemical term.

    Is it going to continue? Has there been any reason why it would stop?

    It started in the US housing sector, and that is where it will have to end. Meanwhile, we all have to lump it.

    Thanks George! It hasn't been fun. Have a beastly retirement!

    October 24, 2008 at 1:40 am |
  49. Mindaugas ,Lithuania

    Markets will recover as quickly as they went down. It will not happen over one day, but it will for sure , and it will take several weeks to climb 40-60% and more up. Next question is who will buy all these cheaps stocks ? There will be new winners , which wealth will raise in 10 times and more .....those who sell now their own stocks will face the defeat.

    October 24, 2008 at 9:22 am |
  50. Wil

    volatility is good for the traders. Share prices going up and down, means more earnings for them.
    Nothing wrong with that, because they are suffering from the colapse of the share prices. But it means that they will also stimulate the volatility. And they are helped by the public media. We like news and media. So we ask for volatility.

    October 24, 2008 at 9:29 am |
  51. Mindaugas ,Lithuania

    Media creates panic world wide while there is no any reason to drop indices around the world for 5-10% each day. Who is profiting from the cheap shares ?Those who is ready to buy them and then sell next month with 100% profit when panic is gone. Traders are not main force here ,big investors are behind .

    October 24, 2008 at 10:09 am |
  52. Sam in Spain

    Todd, Short and simple-- having just heard that all the companies "Bailed out" by the U.S. taxpayers I have never come across anything so despicable that the huge bonuses will still be paid to those who participated in bringing their companies to their knees. Instead of paying them bonuses, they should be prosecuted as they have brought the U.S.A. into disrepute.
    It is therefore doubtful if the U.S. will ever regain their credability again as the leader of the financial world which may transfer to the Far east

    October 24, 2008 at 10:17 am |
  53. Theo

    Which market is bigger ?

    The real market or the "cyber"market ?

    SIV = special investment vehicles have been mushrooming over the last ten years – their purpose is to deal in "financial instruments" (outside any regulation as stipulated in Basel I and II) carrying funny names that mainstream never heard off !

    The name of the game is -casino royale- I am sure government officials had to be briefed to get at least a glimpse of understanding what is going on in the world of "financial engineering". Where speculations outnumber the pysical value of traded goods (like oil) by a factor 10 or more.

    The situation today:

    say a wall / a dam has been constructed and you had just enough money/material to build it 5 meter high.
    A tsunami is imminent but you would not know if the incoming waves are 5, 7 or even 12 meters high. In the latter case you would have to rebuild from scratch, because everything is lost – in the first case youre "measures" would have been appropriate.

    kind regards

    Theo

    October 24, 2008 at 11:02 am |
  54. Jaime Remedios

    YES. We have unleashed the worst of the human race. We are all disguised beasts. Anybody with a little of soul is called socialist. So, doomsday is here!!

    October 24, 2008 at 12:10 pm |
  55. Robert

    Still too much uncertainty, not only surounding economic fundamentals, but unwinding of hedge funds and questionable securities. Paulson and Bernake could start to ease fears by placing more immediate controls around derivatives, credit defaults, etc. The average investor just does not know what is out there.

    October 24, 2008 at 12:29 pm |
  56. ANNE EVANS

    WE BAIL OUT AIG FANNY MAE FREDDIE MAC, NOW WE ARE GOING TO STABILIZE ALL THE BAD MORTGAGES. HAVE THE PEOPLE WITH RETIREMENT MONEY ALL BEEN FORGOTTEN. INSTEAD BAIL US OUT! OUR LIFE SAVINGS ARE GOING GOING GONE AND NO ONE THINKS ABOUT MAKING US WHOLE AGAIN. WHY NOT? DON'T WE MATTER TO ANYONE. WE ARE THE ONES THAT DIDN'T MAKE THOSE BAD MORTAGE DEALS, WE SAVED OUR MONEY AND INVESTED IT THROUGH IRAS AND 401K AND WE ARE GETTING HAMMERED. WHERE IS OUR BAILOUT!!!

    October 24, 2008 at 2:09 pm |
  57. Mike

    I really believe that the media needs to take some responsibility for the financial fiasco that we are going through. Not the bad loans; not the questionable securities; just for beating without let-up, the drumbeat of despair. The hype and hyperbole are incredible. Everyone seems to be trying to out-depress the other, as if there’s a Pulitzer for story of 100 words or less with the most gloom and doom. A constant barrage of cut-your-wrist headlines everywhere. Just look at your main webpage. Horrible but do you really need to keep pumping the bellows?

    October 24, 2008 at 2:16 pm |
  58. Dire

    The volatility will continue and right now I don’t see a bottom to this pit. Is there an answer? Is there a solution? If you asked me, the answer is to get rid of the people who raped and pillaged America and sold us out to the highest bidder.
    Who are "THEY"? THEY are our Democrat & Republican Congressman & Congresswoman who have done nothing for the past 20 years but bicker and destroy our economy one legislative bill at a time, THEY are the CEO's and Board Members who rape our companies by giving salaries to each other in the hundreds of millions of dollars while the average Joe Worker gets by on scraps, THEY are the Bankers and Lending institutions who suckered Americans into believing it was possible to have the American Dream for next to nothing, THEY are the people who thought a global economy was the wave of the future, THEY are the businesses and companies who farmed our jobs overseas to unskilled and lowly paid foreigners, THEY are the companies who have gutted the middle-class in favor of the almighty buck, THEY are our legal system of (courts, lawyers, judges) who've failed to enforce our immigration laws, who let 10+ million illegal aliens swarm into our country and destroy our infrastructure, THEY are the elected officials who have squandered our countries money on foreign wars, and on foreign loans to corrupt governments, THEY are the committees and agencies who bribed our Senators & Congressman to overspend and buy into the [Greed Is Good] mentality. Who are THEY? THEY are US! WE are THEY. We let this happen to ourselves by believing in our government, our Banks, our CEOs and our legal system. THEY & WE were wrong. And about the only way to take back our government and rebuild America is to get rid of these worthless policies that our elected officials shoved down our throats and get rid of the current congress & administration. We alone allowed ourselves to be led down this path of destruction and we alone need to fix it.

    October 24, 2008 at 4:21 pm |
  59. Steve Franks

    Is the volatility going to continue?
    One must look back to the past, into history. In 1980 the Dow Jones Industrial Average was 700-800, it has taken 28 years for the Dow to reach 14,000. It will be interesting to see the number of days to again reach 700. The smart Hedge Fund managers are bailing-out, going-long with cash until the market reaches 500, then they will go long on stock of well managed companies at bargain prices. My prediction, the DOW will reach 500 and rebound again over a 28 year period, history has a tendency to repeat itself. I suggest a buy order at 500 and hold.

    Best regards,

    Steve Franks
    Camp Bucca, Iraq

    October 24, 2008 at 6:25 pm |
  60. Elvis

    Behold!! Do you notice that despite the viotility in the market the DOW support level remain stroing at 8200. I believe, 8200 level is the BOTTOM of all this shenanigan. But have to wait few more weeks to confirm this...just my guts at the moment....

    October 24, 2008 at 6:57 pm |
  61. John Frey

    I think it is poetic justice that the stock market is falling when they helped most of the firms out sourse thier jobs overseas. Take boeing for example-for every job they out sourse 3 more are lossed in Seattle. Someone needs to look at history ....mainly Flint MI with GM to see what Seattle is facing. And what is Pres. Bush answer help out the firms-what about the ones that lossed their homes because of outsourseing. They thought it was great living in the USA making good wages so one can buy a home and new car and so on with credit because they made such good wages. Little did they know that thier jobs were in danger of going overseas on a large scale. no one is doing thier homework and checking how many lost their hoimes because they lost their jobs. The fatcats got greedy... so if you loss it all in stocks take it like a man because it is what you deserve!!!

    October 25, 2008 at 3:54 am |
  62. Andreas, Sweden

    Steve,
    If the DJIA hits 500 we will have a severe 'depression' and not just a recession that most are talking about. Right now it's impossible to tell what will happen because logic seems to have gone out the window. Large selling of equity has less to do with projected value than need for cash so the huge swings are artificial from a 'normal' trading point of view. This is a dream environment for technical day traders while everyone else is looking towards the bond market. If a complete collapse in the debt securities market can be avoided (we're not even there yet) this recession can probably recover faster than most anticipate but if a debt collapse occurs your 500 level could very well come true, god forbid.
    btw.Stay safe over there!

    October 25, 2008 at 9:48 am |
  63. Jørgen Simonsen, Denmark

    Almost all leaders end decision takers all over the World, which has shown that they are incompetent, are still in charge.
    They have to be replaced ore learn new ways – and to teach them common cense, is almost impossible.
    This crisis has still a long way to go.

    October 25, 2008 at 10:12 am |
  64. se chap niwe

    I believe that Dow Jones ind. index will touch 7414 points eventually.
    The share markets' sharp fall over the world are caused by the
    strange movements of some planets which affect the earth badly.

    October 26, 2008 at 12:45 pm |
  65. Stephen Isaacs

    We are being told that the stock market fundamentals remain strong, even though stocks continue to decline. We are further told that the housing crisis was a factor in the stock market decline, and that it should turn around now that Congress passed the economic stimulus package.

    I have always voted Democrat. Now I am not so sure that Obama is the answer to the financial crisis Bush politics caused this country.

    I have noticed a relationship between the increase in Obama's poll numbers and the continual decline of world and US stock markets. It began after Hillary Clinton's loss in the primaries. Has anyone else noticed the decline in the markets with Obama's rise in the polls?

    October 26, 2008 at 9:24 pm |
  66. gramma joanne

    Where did the bailout money come from to pay off the bad debts? The government obviously had to borrow it.. From whom? And why is government bad debt good but private citizen bad debt bad? And who has to pay it back – US little guys out of a job or retired and sweating our SS. You really think governmnent can take better care of our money than we can??? Give it back to the people - $250,000 for everybody over 21 and not making a million. The government gets half back immediately in taxes in April (or take it in advance) and just watch how well we can spend it. As for the election – don't believe a word of any of it.

    October 27, 2008 at 1:20 am |
  67. JAEMS KOLOUSEK

    Always keep in mind. The news' purpose is to make the public think the environment is more dangerous than it actually is. To stop people from believing in hope.

    October 27, 2008 at 5:33 am |
  68. Tan Boon Tee

    Doubtlessly, the market volatility will continue, for many months more.

    For years, I have been advocating thrift – live simple and eat simple. Yet people opted to squandering the precious resources of earth and lead a life based on relentlessly lavish consumerism. NOW WHAT?

    First came the crazy soar of oil price, followed by the upsurge of food prices. Now we are dearly paying the toll. Any regret?
    (Tan Boon Tee, Singapore)

    October 28, 2008 at 3:23 am |
  69. Stan Barrett

    I suspect that a large portion of the market volitility will be reduced next week when the long term direction of the US presidency becomes known. The new leader is going to face tremendous uncertainty on many levels which will all eventually be seen in the economic numbers. And, both men will have drastically different approaches to the issues. Realizing that the financial boys all live on data, perception, and anticipation..... I cannot help but wonder how much is now being priced in for an Obama win ?? Or... is the volitility largely just a reflection of that uncertainty too??

    October 28, 2008 at 6:55 pm |
  70. KOLADE OLAMIDE

    IRREGULARITIES IN THE POLITIC STYLE OF LEADERS

    CHAPTER ONE

    Reverse is the case with the development of the nations of the world. Due to natural disaster like hurricane, earthquake etc, war, corruption, mismanagement and bad policy. Global economy crisis is biting beyond control. Checks and balances that would have been put in place have been misplaced. Prevention is better than cure as they used to say. It is too late to cry over split milk. Both the rich and the poor would suffer from the economic crisis.
    Even if you have enough money, where is the confidence for you to invest your money? There is fear in buying shares, houses or setting up businesses. There is no successful business without a good decision making. The survival of businesses depends on the policy of government. If right policies are not formulated in time, it would affect businesses. The future is also endangered. Forecasting would be a difficult task for a businessman not to talk of maximizing profit.
    Policy makers ought to put the negative impact of policies into consideration before executing. Public interests should be the priority of policy makers in taking decision. The failure of policy makers to make the right decisions can lead to economy crisis. There is need to study the market on daily basis and set standard for appropriate corrections at the right time whenever there is notice of deviation. There is no need to pretend that the economy is booming while it is declining. Crisis could be prevented rather than trying to battle with it.
    To say policy makers are novice in their various fields won’t sound sensible. But the fact is that politics should be done away with economics. The economy of a nation is very crucial. It is not advisable to play politics with the economy of a nation. It could be very risky. That is why is very important to elect competent, reliable and dedicated leaders without self-interests. Though no one could be said to be perfect, but the decisions of leaders are crucial to the lives of their citizens. Corrupt persons are not supposed to be given the chance to direct the affairs of a nation.

    October 30, 2008 at 8:54 pm |
  71. Patrick Moran.

    My 3 previous items will not help dynamic action in the first 100 days.
    4/ In the meantime contact Lady Thatcher and Lord Sieff about an anti red-tape supremo. My guess is that she will say it was a success but he will say he merely eliminated a few forms. His success in streamlining bureaucracy at Marx & Spencer resulted from having the power which he did not have in government. Red tape is created at the legislative as well as the executive stage. For example, the UK has about 70 different welfare benefits instead of a tax credit system which would make our largest government department redundant. People involved in this project need to read "Your Disobedient Servant" by Leslie Chapman, "Whitehall – Tragedy & Farce" by Clive Ponting, "Can We Improve on Bureaucracy" by Patrick Moran and "Reinventing Government" by David Osborne and Ted Gaebler although the last named are commercial consultants. Patrick Moran.

    November 8, 2008 at 1:39 am |
  72. Colin Waters

    On the "Your Money" show today, Ali Velshi stated that government getting involved does not seem to work, citing the example of banks not using bailout money for loans.

    Certainly the banks are using bailout funds in their own best interests, not in the interests of the US taxpayer. But surely this is because of insufficient government involvement. A comparison of the current UK and US bailout plans shows:

    UK – Guarantees for taxpayers. Banks are required to use bailout funds for loans to homeowners and small businesses. US – No guarantees for taxpayers, unconditional funding; Banks can use the funds for anything – acquisitions, even bonuses.
    UK – Restrictions on executive bonuses. US – Effectively none
    UK – Suspension of dividend payments to shareholders. US – Taxpayer funds will be used to pay dividends.
    UK – Voting rights. Government (taxpayer) membership on the funded Banks’ boards of directors. US – No voting rights or involvement in funded Banks management.
    UK – 12% dividend to the Government (taxpayer). US – 5% dividend to the Government.

    With the economy continuing to worsen, the kind of thinking about government control that Ali Velshi expressed (plus of course concern over even a suggestion of “Socialism”) has allowed our current administration to push through the crowning jewel of their corporate welfare program, while achieving nothing for main street USA. We now have even more massive debt, with nothing to show for it.

    Mr Velshi, a little more government control here might not be a bad thing.

    November 8, 2008 at 8:25 pm |
  73. Sam in Spain

    Todd,
    I think we are on the same wavelength, many people I know think that I am a pesamist whereas I believe I am a realist. I have seen many of the downturns and upturns in the market since I became involved in the Financial/Investment Industry in 1969. I have los money and also made money on the markets, however the current situation in my opinion is developing into a much longer recovery than what I believe is being forecast.

    There will globably be further unemployment in virtually every country.

    As for the incoming new President, I am sure that he wishes to try to fulfill his programme but I don't believe it will be possible for him to do so as he inherits such a burden of debt.

    One of the main things missing from the equation is that those governing in all countries are AFRAID TO TELL THE GENERAL PUBLIC THE TRUTH, refuse to admit to errors and continually "pass the buck"

    I am still investing, not for me but my wife, on a "Pound Cost Averaging Basis" and I have already forecast that the FTSE will bottom around the 3,500 mark. Currently the portfolio is down 20% on the year but we are picking up lots of Units in Unit Trusts on the basis that what goes down must go up and what goes up must go down (assuming that past performance of the stockmarkets follow the norm). However one of the main items that we must get rid of is the amount of CORRUPTION AND GREED IN ALL COUNTRIES.

    I do not believe that either the World Bank or International Monetary Fund should provide any funds to countries that they know are corrupt and having travelled quite extensively I have seen naked corruption first hand.

    I hope that President Elect Obama can sort out most of the problems but I believe that it may take him 2 terms, if he is successful in his first term.

    Old Retired Financial Advisor

    November 11, 2008 at 7:56 pm |

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