Weekend Reading: Volatility Rules

Good Sunday afternoon, and welcome to another edition of Weekend Reading. First a look back at the week that just finished, then a look forward to the week ahead, and, finally, a summary of articles and papers worth reading.

It was another wild week. The major U.S. indices started the week like the final slide into financial oblivion was nigh, only to turn around and have two smartly up days in a row, then sell again and then rise again. The markets ended the week down, despite all the gyrations, with non-U.S. markets doing worse than domestic ones. (Japan's Nikkei lost 7% on the week.)

If you think it's just you feeling like the markets are absurdly volatile, it's not. You can look at the VIX, which sits at levels once thought impossible, or just consider the daily percentage moves. Since Lehman Brothers failed back in September, we have have had precisely nine days on the S&P 500 where the markets moved less than 1% up or down. That sort of thing has never happened before on the S&P in any period of similar length.

Looking forward to the week ahead, we're likely to see more of the same volatility. Bulls are coming out in force, even if the economic data remain dreadful, from jobs to retail to prices. The tussle between worried bulls (What if this is/isn't the bottom?) and worried bears (What if I get caught in a squeeze?) will define things, as will any random surprises, whether positive (buyouts and bailouts) or negative (sovereign failures, credit cards, commercial real estate, etc.).

Turning to economic news, there is plenty to come, most of which will be awful. Towards the end of this week we will see November retail numbers and weekly jobless claims, both of which will be icky, unless Chinese hackers mess with the figures. Keep in mind, however, that markets last week shrugged off the worst employment numbers in 30 years, which is usually a sign they think things have bottomed. If we can shrug off more bad numbers this week, that will be awfully bullish.

Turning to earnings, the week is almost empty. Two worth watching, however, are H&R Block(HRB Quote) and National Semiconductor(NSM Quote).

Finally, here are some articles and papers worth reading:

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• A Changing World For Hedge Funds. (IDD)
• British Home Prices Keep Plunging. (BusinessWeek)
• Financial Darwinists should applaud debt-costs jump. (Bloomberg)
• Barron's picks Leucadia(LUK Quote) and exchanges, but pans pension plans. (Barron's)
• Public Debt, Inflation and the Stock Market. (CXO Advisory Group)
• Profile of John Bollinger. (Los Angeles Times)
• The corporate lending squeeze. (The Economist)
• REITs battered down to eye-catching levels. (Globe and Mail)
• What happens during recessions, crunches and busts? (IMF)
• Obama Pledges Public Works on a Vast Scale. (The New York Times)
• Obama plans largest buildings program since 1950s. (Bloomberg)
• The past, present and future of subprime mortgages. (Federal Reserve)
• Despite Recession, External Disk Storage Sales Grew 8.8%. (Byte and Switch)
• Intel(INTC Quote) job cuts coming, says analyst. (EE Times)
• Paul Krugman on what to do next. (The New York Review of Books)
• Do Sovereign Wealth Funds Best Serve the Interest of Their Citizens? (SSRN)
• Hedge funds are making money with variants of original TARP plan. (New York Post)
• South African Companies Unlock Sub-Saharan Africa. (BusinessWeek)
• A financial planner turns shaman to manage his clients' money and their souls. (The Washington Post)
• How Venice Rigged The First, and Worst, Global Financial Collapse 660 Years Ago. (myprops.org)
• Mexico: The Next Disaster. (Forbes)
• Allan Sloan: Maybe It's Time to Buy. (The Washington Post)
• Happiness Adaptation to Income beyond "Basic Needs." (NBER)
• Bretton Woods and the Great Inflation. (NBER)
• Financial Crash, Commodity Prices and Global Imbalances. (NBER)
• So long, "Great Moderation." (Setser)
• China's impact on the semiconductor industry. (PricewaterhouseCoopers)

1 What would best describe your stance heading into the coming week of trading? Bullish Bearish Neutral 2 Which of these sectors do you think is set to move up in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities 3 Which of these sectors do you think is set to move down in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities View the results without voting