There has again been a short period of drift and volatility in ‘The Markets’ recently.
And yet again we have heard the old refrain:
“Markets hate uncertainty”.
This we assert is yet again a misused turn of phrase. It is not uncertainty that markets hate, because inherent within market processes and market operations is the principle of uncertainty. This is also known as – Information Asymmetry.
So, if it is not uncertainty that markets hate, then what is the missing ingredient that delivers these periods of volatility?
We believe what markets require above all else is:
Structure.
Yes, structure and clear operating parameters, in other words a framework within which to operate is the key.
Whether that structure and framework is delivered via regulatory mechanisms or liquidity or a political landscape that sets the parameters in terms of policy guidelines and fiscal and monetary controls, it does not matters.
Remove the nebulous shifting and drifting borders and put in place a framework that sets the framework and outline of the playing fields and markets respond positively to these signals.
Refrain from doing the work of ‘framework establishment processes’ and markets and their participants become ‘restless souls’ aimlessly drifting within the ‘nebulous fog’ of uncertainty, clearly waiting and anticipating the regularity that structure delivers to the ‘Market’
Related articles
- Frameworks, frameworks, frameworks… (themarketsoul.com)
- Market volatility rules as traders ponder (optionsanimal.com)
- Why Uncertainty Is Your Friend (juangreatleap.com)
- John Tropea: We have been badly in need of a framework that explains the certainty and uncertainty associated with outcomes (johntropea.tumblr.com)
Tagged: 2010, Analysis, Compliance, Compliance Regimes, Economy, Financial Regulation, Free Market, Information Assymetry, Opinion, Political Economy, Politics, Regulation, theMarketSoul
