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Volatile volatility

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I was struck by the phrase “volatility itself has been volatile” in the FT article this morning. It pretty much sums up both the confusion and concerns in the market about whether risky assets are at an inflection point or taking a breather before embarking on another leg up.

The central bank meetings this week certainly aren’t helping, but the FOMC, the ECB or the BOE aren’t likely to do anything that’s going to signal a shift in policy. FOMC should keep the phrase “extended period,” while ECB isn’t likely to given any new insights on the euro or interest rates. The BOE could add more fuel to its quantatitive easing program, but that would hardly be earth-shattering news given its losing streak on growth.

There is the U.S. employment report later in the week, but no one is expecting a turnaround there either. In fact, most have their eyes on the magic 10, as in 10% unemployment that seems simply inevitable given the lousy job market.

Still, the VIX – the fear gauge that measures equity market volatility – is, well, looking pretty volatile.

It’s not over till it’s over

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Over at The Big Picture, Jack McHugh makes some interesting comparisons between the calm seen in the markets now as banks and investors wrap and the quarter and a year ago. His takeaway though is don’t expect a repeat of last year’s second half meltdown.

…A venerable investment bank had disappeared, stocks had set a major low in March before rallying smartly, the VIX had fallen by more than 50% off its March peak, and both Wall Street executives and Washington policy makers were claiming, “the worst is now behind us” Though it seems like a lifetime ago, the moment in time to which I refer is the end of 2Q 2008, but it could just as easily be Q2 2009. During May and June of last year, I wrote ceaselessly that the financial crisis was not “contained” and that the worst was still ahead of us….

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