Unprecedented Volatility Rules Market

The market continues to swing wildly as uncertainty about the Treasury's recovery plan haunts participants. Economic conditions are not helping either. This morning durable goods orders fell more than expected and jobless claims rose more than expected. Offsetting this negativity was some positive feedback from Congress, the Exec. Branch, and Treasury stating they can resolve their differences and put together a plan to buy distressed mortgage assets at hold-to-maturity values. Their hope is that such a grand plan will put a floor in mortgage debt prices, lower mortgage rates spurring demand for housing, and restore some liquidity to bank's balance sheets. The question is will banks lend and will people gain enough confidence and have access to capital to buy houses.

On CNBC, several charts of the DJIA a year after market crashes (and the RTC) were posted. Most of the markets were flat, slightly up at best, and down further at worst. All periods exhibited very volatile moves, but were very range bound and weak. I think that it'll take time to work through this period and an imminent recovery is not at hand.

Job losses are still a big concern (unemployment rate is at 6.1% currently). Europe is weak and Japan has already had one quarter of contraction. Gasoline is still at $4 a gallon virtually everywhere. Finally, you have baby boomers moving past their peak spending years causing a significant decrease in consumer spending. If the Treasury and Congress can't get a plan together, the markets are in trouble.