Hello, Volatility!

For our weekly TV & streaming
web show, Doctor J & the Traders (www.webfn.com,
Thursday 6:00 p.m. ET and throughout the weekend)
, we are going to talk
about three topics: 1) Consumer Confidence, 2) Volatility; and 3)
Valuation. In researching the Conference Board, the group that produces the
Consumer Confidence numbers, I found that their membership includes more
than 3,000 companies and other organizations in 67 countries.

Perhaps like many of you, I was shocked to see that consumer confidence
actually up-ticked for the first time in five months. I thought maybe I
should call Benicio
Del Toro
to see if he could get me a bag of whatever the Conference
Board was smoking, but then I took a closer look at the data and didn’t
see positive sentiment as much as I saw a slight decrease in

Their sampling of 5,000 households has shown a 24% drop in consumer
confidence from a high reading of 144.7 in early 2000, to the low of just
109 last month. Taken in that context, the anemic rebound is more
understandable. I was dismayed that the Director of the Conference Board’s
consumer research center saw, “The recent weakness in the stock market has
done little to dampen either consumers’ assessment of present economic
conditions or future expectations.” Oh, is that so? She should take a
walk on a trading floor sometime if she wants to see dampened spirits. I’m
sure the venerable Conference Board would be overcome by the absolute lack
of investor confidence.

As far as today’s trading, it’s hello volatility again! This morning’s
sharp selloff was quickly offset by an equally forceful rally. The premiums
(often referred to as option volatility) have held at historically high
levels for the past 20 days. Part of the reason behind that was the fact
that the Fed made us wait for their generous 50-bps cut, during which time
the uncertainty kept premium sellers on the sidelines. However, once the
baby was born and we got what 66% of us thought we would get, the premium
sellers stepped back up to the plate, only to be brushed back by a series of
nasty selloffs and this latest robust rally. Right now, there are some
pretty bruised premium sellers licking their wounds and wondering just how
long these volatilities can hold.