Midday Musings: Absence Makes the Volatility Grow Fonder

shoulda seen it coming
shoulda seen the signs
shoulda seen it coming
Must've 'bin blind

SAN FRANCISCO -- To paraphrase that "great" philosopher/muse Bryan Adams, many investors knew something was going to give before Wednesday's tumult. Stocks and stock proxies had risen far beyond what the nascent economic and earnings recovery could sustain, but such concerns were aired long before the recent declines. As is often the case, they didn't matter until they mattered.

Hindsight being 20-20, one way investors could have known a comeuppance was coming was the lack of volatility in the weeks preceding the downturn.

In an era when many commentators chose never to speak ill of stocks, volatility become a euphemism for a down market. But, of course, volatility describes a market moving sharply in either direction. Today's rise -- major averages were solidly higher at midday -- after yesterday's fall therefore represents a continuation of volatility, not the end of it. ...