Stock Market Volatility

Fascinating. The markets are up one day and down the next. Seemingly in parallel motion and of similar numeric measure. Swooping markets, really. Up a little or a lot, reversing directions of stock prices, jittery buy and sell orders, volumes enormously inflated, what do we call that pattern?  Market Volatility!

It is caused mostly by skittish buyers and sellers who nervously watch every indicator for a cause of the swift changes. Might it be unstable financials from Greece? Or maybe the market gets spooked because China mumbles something about being upset with the West over cultural differences? Maybe it is caused by rattling of military equipment by Russia? They soar a fighter jet over Sweden, the UK, Germany, Ukraine, wherever. Other nations squeak their disapproval over such rallies of military power, and the market drops like a rock. Or maybe the market soars on the same information. Games. Volatility. Which action is real and which fake?

The rhyme and reason of market movements become less predictable. That’s volatility.

Of course there are people in the market who follow the phases of the moon, horoscopes and other biorhythms that only they can hear (or feel?). They add their own oddities to the market. Mysterious vibes move the market, too! It is not all science or order. Chaos theory does operate in this environment. Volatility however construed remains our experience nonetheless.

Short traders don’t provide healthy movement in the stock markets. They create chaos and upset. I think some big, institutional traders intentionally upset the market to manipulate it. If they can spook other traders, especially the small guys, then they have movement they can trade on and make money. They can position their balance sheets in small ways that will boost quarterly earnings significantly. Manipulation. It is done by the big, savvy traders. Frequently. Bonuses often depend on these manipulations.

And so it goes. Week after week, month after month, and in some instances years of such folderol. Patterns belie randomness. Such volatility is engineered by manipulators. The only reason they are not prosecuted is due to the sheer numbers of the players and enormity of the stakes. Perhaps there is a more sinister side to this argument as well – manipulation serves the ends of many people guilty or innocent of skullduggery. But the rhythm interrupted would spell incalculable harm to many others. So it is allowed and even curried by some governments scattered across the globe.

I prefer honest markets. I also prefer honest discussion of facts that build honest industries, commerce and foreign affairs. Markets can be built on those facts. Those markets would be a true representative of the values at work within the markets and reward risk takers who actually accomplish something in the business world.

It is not about money. It is about product and services. Money is just a language among the players, and a math that allows them to keep score – who is winning the wealth, and who is losing it?

Markets are arbiters of value. They always have been. I think they always will be. But preferably only if they are open, free and honest. Today’s markets cannot bear that analytic truth.

When shall it?

June 30, 2015