The Markets Have Motion Sickness

via Matthew Yglesias:

Here’s a look at some different time periods and the total number of days the S&P 500 has moved up or down more than 5% during the trading day:

* 1950-2000: 27 days
* 2000-2006: 7 days
* Jan. 1-Sept. 30, 2008: 20 days
* Since Oct. 1, 2008: 22 days

I don’t think I’ve seen anyone even seriously attempt to explain why this would happen. Stock market crashes are, obviously, not unprecedented. But never before have they entailed this kind of wild, up-and-down day-to-day swinging. What’s different now?

Basically, you have the internet and the majority of people investing money in the stock market don’t know what they’re doing, viewing equity investment as something like near-term gambling. Plus ample amounts of fear and greed.

What are things worth? The one thing I know is that no one knows.

Except: “Not only have individual financial institutions become less vulnerable to shocks from underlying risk factors, but also the financial system as a whole has become more resilient.” – Alan Greenspan 2004

Source: TIME