Why The Market Is Making You Sick

The Business Insider ^ | 6-9-2010 | Clemens Kownatzki

[blam]

Why The Market Is Making You Sick

Clemens Kownatzki
Jun. 9, 2010, 10:39 AM

Most average investors have a hard time grasping some of the more abstract concepts such as Market Volatility. But everyone knows when the market crashes it hurts the portfolio and ultimately your own wallet. During the financial crisis of 2008/09 the VIX Index, also known as the fear index, was one of the new trendy financial terms you could hear at cocktail parties. Instead of the talk about the Lakers or the Dodgers, I remember hearing “How about that VIX” at more than a handful of social events in 2009.

So what exactly is this VIX measuring and what is volatility? You can “google” the word volatility and results along the lines of “annualized standard deviation of daily returns” will pop up. Lingo aside, it is easier to understand the concept with this analogy: A roller-coaster ride and its up and down movements at relatively high speeds is what volatility feels like. That combination of up/down as well as sharp turns at the high speeds is what makes our stomachs turn. And you typically get more sick in a fast down turn because of the fear of tumbling all the way to the ground. The VIX expressed that fear of tumbling most vividly in 2008; as the markets were crashing the index for fear was at an all-time high.

[Diogenesis]

FLASHBACK: from 9/15/08:

Rep. Kanjorski: $550 Billion Disappeared in "Electronic Run On the Banks"
"On Thursday Sept 15, 2008 at roughly 11 AM The Federal Reserve
noticed a tremendous draw down of money market accounts in the USA
to the tune of $550 Billion dollars in a matter of an hour or two.
Money was being removed electronically. The treasury tried to help with $150 Billion.
But could not stem the tide. It was an electronic run on the banks
The treasury intervened but had they not closed down the accounts they estimated that by 2 PM that afternoon.
Within 3 hours. $5.5 Trillion would have been withdrawled
and collapsed and within 24 hours the world economy."

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FLASHBACK: from 9/15/08:

“U.S. President George W. Bush said Monday he is confident
that the markets are resilient and can deal with the latest financial blows.
“We are working to reduce disruptions and minimize the impact
these financial market developments on the broader economy.” ...

U.S. Democratic presidential candidate Barack Obama
said eight years of Bush “brought us the most serious financial crisis
since the Great Depression.”

His Republican rival said John McCain said he was happy the
federal government decided not to use taxpayer dollars to bail out Lehman Brothers.”

How did Obama know THEN
that we would experience the ‘most serious financial crisis since the Great Depression’
when those who did not plan the takeover would not know for three more months?

[listenhillary]

One of your links would make it appear that they did it reeeeally slow. Just trying to help. Great compilation.

Link
Within 3 hours. $5.5 Trillion would have been withdrawled