Markets Misbehave. Certainty is fantasy!

Note: The body of today’s issue is a reprint from 14 August 2007.

How many times have you heard this little piece of inanity uttered: “Markets hate uncertainty.”? I heard it said on Friday as I was “passing through” one of the TV “financial” shows on my way to the Home and Garden Channel—the only place safe on the dial for me. Every time I hear that “uncertainty” phrase uttered, it just drives me nuts!

Why in the heck would anyone in their right, or wrong, mind ever think markets have certainty? If they did, the quant funds wouldn’t be blowing apart right now. If they did, we would have no such thing as a dynamic pricing system. Market certainty is standing in line for eight hours for a loaf of bread in the old Soviet Union—you were certain nothing else was on the shelf, and certain the price would set by the state—that’s certainty for you!