The front page of today’s New York Times is a very interesting if rather familiar article on the increase in market volatility:

“With these whopping 4 percent swings — up 500 points, down 500 points, up another 500 points, down another 500 points — traders have whiplash. We saw another huge move down Thursday, when the Dow, Nasdaq and S&P all lost big, plummeting 3.68 percent, 5.22 percent and 4.46 percent, respectively.

What is going on? It seems that 4 percent — plus or minus — is the new black.”

Ooops, my bad, that was my column published August 19th in the Washington Post, titled Smacked by big market swings, investors should alter their outlook.

The NYTimes piece from today is called Market Swings Are Becoming New Standard, and it begins like this:

“Day after day, stocks swing sharply by hundreds of points. Last week they tumbled 3 percent in the first 90 minutes of trading on Tuesday morning, then on Wednesday closed nearly 3 percent higher and dropped almost 3 percent on Friday. All of this on the heels of unusual back-to-back 4 percent leaps and dives in one week in August.

Now traders head into the week with fresh worries about the chances that Greece will default on its debt and the havoc that would wreak on European banks.

All of this anxiety has caused experts to ask whether there are new forces at work in the stock market that make trading permanently more erratic.”

That’s also good stuff, but for investors, it is rather late to the party.

And that is the key to our Read It Here First series. I am not suggesting that Louise Story in any way copped my piece. Hey, Volatility is out there, you would have to be blind to miss 500 point swings in the Dow.

But the point I want to make is that market practitioners/bloggers have advantages over Old Media in spotting these trends. Its always fun to beat the big guys to the punch on these things. Indeed, we had almost a full month head start. Other researchers, bloggers and strategists who cover markets do get to see their work bubble up eventually to the front page of the NYTimes.

We have been looking at “influence” a lot lately, and it is gratifying to see the new media community influencing the debate (even if we have to use old media to do it!)

>

Previously:
The Most Volatile Market Ever (November 25th, 2008)

Stock Market Volatility, Bank of America, Investing (August 9th, 2011)

Sources:
Market Swings Are Becoming New Standard
LOUISE STORY and GRAHAM BOWLEY
NYT, September 11, 2011   
http://www.nytimes.com/2011/09/12/business/economy/stock-markets-sharp-swings-grow-more-frequent.html

Smacked by big market swings, investors should alter their outlook
Barry Ritholtz
Washington Post Friday, August 19, 2011 
http://www.washingtonpost.com/smacked-by-big-market-swings-investors-should-alter-their-outlook/2011/08/18/gIQAriG8RJ_story.html

Category: Apprenticed Investor, Financial Press

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

11 Responses to “Read It Here First: Rising Market Volatility”

  1. tawm says:

    Just checking back in and almost fell out of my chair to see BR actually criticizing the NYTimes…

    ~~

    BR: You are kidding, right? I am not sure if you are joking or not . . . ?

  2. machinehead says:

    Here’s the ‘graf that jumped out at me in Story’s story:

    It has become more likely for stock prices to make large swings — on the order of 3 percent or 4 percent — than it has been in any other time in recent stock market history, according to an analysis by The New York Times of price changes in the Standard & Poor’s 500-stock market index since 1962.

    Daily Dow Jones averages are available back to 1896. Why would the NYT want to analyze only 50 years of data, when 115 years are available? Evidently, to curve-fit the conclusion that volatility is higher than at any time in recent history.

    But of course, volatility was even higher in the early 1930s, a period which definitely rhymes with today. That’s exactly why prewar data should not be airbrushed out of the picture — it is very relevant to contemporary markets.

  3. Global Eyes says:

    When it comes to trend spotting, many can be second but ONLY ONE can be first.

  4. zcwotun says:

    ” and it is gratifying to see the new media community influencing the debate (even if we have to use old media to do it!)”

    to be a bit cynical, I think that it’s more search engine optimization-driven editorial standards that’s driving the NYT lede. The HuffPost-model for news is the future.

    Though absolutely if more people read BR instead of the drivel that Friedman spews, the “intelligentsia” would be for the better.

  5. pintelho says:

    BR…well deserved ego boost for you. cheers.

  6. [...] market volatility is the new normal.  (NYTimes, Big Picture, [...]

  7. John says:

    Barry,

    You are missing a syllable in the last word of your headline. (Unless you are referring to a different kind of ups and downs).

    ~~~

    BR: Whoops! I’ll fix

  8. happydaze1 says:

    Oh snap

    Aug. 13: Whatever Happened to ‘Risk Free’?
    “It’s been dizzying. The markets have been swinging madly up and down — mainly down for equities, as anyone in the stock market knows too well. How bad has it been? Despite brief rallies, the Standard & Poor’s 500-stock index has fallen more than 13 percent from its May peak. For four consecutive days, the index moved up or down by at least 4 percent, the first time that’s happened. In a steadily rising market, investing may be a pleasant pastime, like knitting or chess or antique-collecting. Lately, it’s been a blood sport.”
    http://www.nytimes.com/2011/08/14/your-money/when-a-risk-free-investment-suddenly-is-not.html?scp=1&sq=market+volatility+%22new+normal%22&st=nyt

    Aug. 13: Investing in Volatility, to Cash In or to Hedge Bets
    http://www.nytimes.com/2011/08/13/your-money/asset-allocation/investors-find-new-ways-to-strategize-amid-volatility.html?scp=2&sq=market+volatility+&st=nyt

    Does that mean your Aug 19th report was six days too late to the party for investors?

    I don’t mean to be a d**k by posting this. I truly enjoy your blog for its consistency, devotion to facts and brilliant wit. Having said that I’ve worked in newsrooms and watched reporters strut around like peacocks claiming that the front page story in the rival paper is “old news” because they’d written on the topic days or weeks earlier. It didn’t look good on them then, and it’s no different when bloggers do it now.

    ~~~

    BR: Neither of those stories is about the increasing volatility int he market and the big daily swings. One is on treasuries, the 2nd on buying collars or using options to hedge

  9. kaleberg says:

    It’s a pretty simple effect and not very surprising. Short term traders can make money in the face of any market movement, up or down. Since they are all watching each other, they crystallize up or down. If you delay or fail to follow, you lose money, so the volatility enforces itself, just as it does with more traditional trading. Self feeding bull and bear runs are nothing new. It’s just we have new types of signalling and a more reactive system.

    Of course, this makes potholes more dangerous.

  10. ben22 says:

    Barry,

    I would agree, anyone smaller should be more nimble in both putting out a message and trading ability than the “big guys” whether it is the media or a huge pension fund

    that said

    I suppose I don’t really get this post

    wasn’t your message “old” for investors by 8/19 as well?

    After all, as of now, the lows have been put in on 8/9 and peak prices were seen for the year in early July, even if we retest them what good did it do to know that by 8/19? The S&P closed at 1123 on 8/19.

    Anyway, now that you are writing on the regular for the Wash Po good luck not getting trapped as one of the “big guys”…..I’m sure emotionally it’s a tall order to try and present good material for that paper while staying true to your process and not getting sucked into the culture, if that makes sense.

  11. [...] is easy in volatile markets like we have at present to get caught up in the day-to-day action.  Most investors have a much [...]