Real Wealth Society

Saturday, March 10, 2007

I've been thinking about volatility By Fred Cederholm

Column for on/after Mar. 4th

I've been thinking about volatility. Actually I've been thinking

about the stock markets, the global economy, technology, efficiency, speed,
and glitches. Last week we experienced something new, something scary, and
something very costly. We - of the investing public - were taken on quite a

You see, the global stock markets experienced one of their highest

trading volume weeks ever. Pricing of equity securities on the world's stock
exchanges for the most part headed south - way south. In the cases of many
of the planet's financial trading bourses, the declines for a week period
set records. In even more cases, a record volume of shares changed hands. At
the New York Stock Exchange last Tuesday, overall declines had not seen such
a one day drop since the declines when the markets re-opened in the
aftermath of the attacks of 9-11 for the week beginning September 17, 2001.

On Tuesday, February 28 alone, 2.25 Billion NYSE shares and 2.70

Billion NASDAQ shares traded. The Dow industrials were down 4.3% for the
week, the Standard and Poor 500 were down 4.4% for the week, and the NASDAQ
composites were down 5.8% for the week - closing at 12,114.10, 1,387.17, and
2,368.00 respectively. While the declines - both in terms of points and
percentages of the market - were not as severe/ extreme as those of Black
Monday week in 1987, or those of Black Friday week in 1929, literally
TRILLIONS of "paper" wealth evaporated in less than five trading days. True,
there was much intra-period ratcheting experienced with some companies
regaining lost valuations; but for the most part, it was a week investors
and brokers want to forget and wished had never happened.

What made the events of this past week so noteworthy was literally

the complete absence of a "noteworthy triggering event." There was no earth
shaking terrorist event. There was no catastrophic occurrence of nature.
There was no sudden change of a nation's governing leadership. There were no
energy production/ distribution cut backs. There were no new wars declared,
or enacted. In fact, overall things (and market motivating factors) were
pretty much as they have been for some time now - not any better, but
certainly no worse. Still. there was more than some undercurrent of
instinctual edginess, or an overriding "malaise of paranoia," on the part of
investors - both individual and institutional - at work here. It wasn't even
the sound of a "pop" that sent investors to the bunkers, it was the
perception of one.

Anyone familiar with my weekly columns - either in print or
on-line - knows how
I've been harping about the escalation/ development of a
global economy and a
global society; and particularly about our own
dependencies on this developing
"unitary planet" system.

Whether we as a
nation-state like it or not, US/us can no longer function very nicely, thank
you, as some island blessed by the warm fuzzies of splendid isolation. The
US economy (hence, our very way of life) depends on a constant influx of
foreign energy, of foreign capital investment, of foreign credit, and of
foreign goods, materials, and services. There is no hope that that sorry
situation of vulnerabilities will change any time soon.

The technological revolutions of computer hardware (and software)

and the information highway capabilities of the internet have connected the
world. News is instantaneous. There are efficiencies for thousands of
transactions to occur AND BE PROCESSED in a second - even in a thousandth of
a second. Never before in the history of our planet can so much transpire so
fast and be known worldwide so quickly. Enter, click, send. has become a
mantra of society. This really scares me and with good reason.

Click (action), click (reaction), click (response) happens so fast

that there little (if any) time to TH*NK and let true reason and wisdom
prevail. As we have just seen, enter, click, send. can literally set in
motion a financial panic. Or worse. enter, click, send. can launch a
military attack. Enter, click, send can even initiate a totally new war. We
have become so fast - make that efficient in our enter, click, send world-
that the so-called checks and stop gaps of our "programmed" system
protections may not work/ function as we expect, want, or need them to
perform. Unfortunately, so often we don't know that is the case until after
an "event" - when it is too late to undo (or stop) what has been set in

The systemic glitches of a technologically connected world, our

planetary interdependencies, and an underlying overriding contemporary
uneasiness of fear; all contributed to the declines of past week. The unreal
(or at least unsubstantiated) perceptions behind the drop of the markets in
Shanghai, China triggered a financial tsunami rippling around the Earth.
What would be the case if a truly identifiable catastrophic event were to
occur? We can only hope and pray that we won't find out. I'm Fred Cederholm
and I've been thinking. You should be thinking, too.

Copyright 2007 Questions, Inc. All rights reserved.

To "audit this column and to learn more about the subjects discussed, please
check out:

The week that was.

Investors on edge after week of turmoil


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