By Mohamed A. El-Erian The gyrations of US equity markets on Wednesday -- the Dow Jones Industrial Average initially surged almost 200 points, turned negative, then finished the day up 122.10 points -- were yet another demonstration of generalized increased volatility. These days, swings in the Dow of several hundred points seem to be the rule rather than the exception, and occur whether the news of the day is big, small or nonexistent. And these wide US fluctuations affect and are affected by global markets that are at least as tentative and jittery.
You might be freaking out now that the U.S. stock market has dropped more than 8% during the first two weeks of 2016. With only nine trading days under our belt (including today) it has been a rough start to the new year. It has not helped our mental conditioning that from 2011 to 2015 we had a four-year stretch of no market corrections. Over the last six months we have now seen drops of 10% or more on two separate occasions.
Why do people do bad things at work? A recent paper out from Andrew Lo, a finance professor at MIT's Sloan School of Management, suggests it might be a lot more about the corporate culture than the individuals themselves.
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Fish yourself a Dow stock out of the earnings pond.
Go ahead—grab your rod and reel one in.
Now ask yourself this question: Will it blend?
Yes, the federal government does a lot of stupid things. And yes, it's easy to see why Wall Street firms are bailing out of the Troubled Asset Relief Program: to avoid having to deal with the government's ever-changing rules and with publicity-hungry congressmen. (Is there any other kind?) But that doesn't excuse the way that Wall Street is engaged in selective memory now that the government has shelled out trillions of taxpayer dollars to keep the Street alive.
Rortybomb submits: There’s currently a shadow bailout of Wall Street coming down the road, a complete steal for the low, low price of $30 million dollars. (Remember “millions”? In the context of shadow bailing out Wall Street, where you need to ante up “billions” and “trillions” to even sit at the table, it’s been a while since I’ve heard the “m” word.)