Is volatility returning to markets?

on March 21 2013 1:01 PM
Markets
A man watches the main stock index under a screen showing the risk premium of Spain and other euro zone countries at Madrid's bourse

Obviously the Vix is low. The world stock markets are all rallying till recently. This all in spite of a currency war in Asia, the EU in constant turmoil, war in the Mid-East getting ready to escalate, the economies of everyone is shambles. What is wrong with this picture?

Gold is so horizontal it’s ridiculous. I said earlier we expected gold to bottom at $1550… it’s been there and hovering around $1600 forever. What the heck is with all this? Gold is THE barometer.

Unless of course if you think like I do that gold is the barometer of the market pressures. Of all pressures. So things go flat for…too long. Hmmm.

But I noticed in particular, in Japan, the land of the endless QE, that this volatility is appearing on the Nikkei. Now considering that Japan is barely staving off a bond crisis of unimaginable size… hmm. The QE king.

And as I said, I noticed that the Nikkei is getting noisy. Now let me talk about noisy.

First, if you follow various indexes, the Nikkei, the Dow etc., the Dax…well normally these indexes correct. Of course. When things go flat, like they have for the last few years with all this QE… pressures build. Noise, when it appears means trouble. Usually. When I say noise I am referring to volatility starting to reappear.

Are the markets chaotic

It’s clear in this world coordinated central bank QE which I estimate at no less than $35 trillion worth and ongoing, since 2008 that the central banks think they can literally manage these stock markets globally. Or else why would they have blown nearly the equivalent of an entire year’s world GDP.

Markets are chaotic. But, there are two ways to deal with an impending crisis. One is to let it happen on its own, like they appear to be doing now, like little chicken banker dweebs, and one other is to go ahead and induce the crisis and let the forces release.

I have two views of this situation. As a mathematician I know that markets cannot be controlled if they are indeed chaotic. Even all the central banks cannot do it. They can extend things, yes.

So one view is ongoing extension and what I discussed last week where world inflation, if all central banks cooperate, is being channeled into all markets. And also another key idea there is that all markets of all types are becoming synchronized due to this.

The other view, one which I am looking at right now here is this idea of chaotic noise beginning to appear in the markets. Just put this note up to guesswork, because it’s just a whiff. But, if you know anything about chaotic processes, the slightest perturbation can set off what’s called a bifurcation or phase change or – in this case a market crash.

Anyway, we have lots of these discussions at www.PrudentSquirrel.com our weekly newsletter of markets and futuristic events.

We also have a fantastic record of prediction. Those include major moves in the USD and Gold for example. Take our latest prediction above as an example. That was made right at the bottom.

Stop by and have a look.

Copyright 2013

Christopher Laird

Disclaimer: Chris Laird is not an investment advisor/professional. This article, and the PrudentSquirrel newsletter and CurrenciesandMarkets newsletter, and alerts, are general market commentary only. They are not intended as specific advice. You should talk to your own investment professionals for specific advice. Information here is deemed reliable but should be verified by you if you think it’s important.

Chris Laird is a mathematician, Oracle systems engineer, and publisher of the PrudentSquirrel newsletter a futuristic and markets discussion.

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