Massive Oscillations and Risk

The massive oscillations we see in financial markets suggests a high level of risk, but notice that the risk is measureably short-term beta.

Short-term beta risk volatility indicates market manipulation. Narrative of the latest financial panic as an elevated risk of a sovereign-debt crisis is not especially convincing. It describes and explains, rather, what is wrong with financial markets--outright beta manipulation of the risk that pushes the gamma-risk indicator higher. The descriptive narrative, and the technical indicators that support the valuation then, are post hoc.

Rather than lower, the gamma-risk indicator is at peak level with the Fed confirming that currency swaps are fully enabled to reduce the probability of liquidity crisis ("making" markets and manufacturing the risk post hoc).

The massive profits from the trage on the latest beta-risk volatility will now massively move into swaps (fractile bets on the risk) that increases the risk of defaults as capital is absorbed into hedging risk and not increasing growth to GDP. The financial system is set up to support the risk and the beta-risk arbitrage, "making" the market for "taking" the risk in an economy-of-scale, too-big-to-fail dimension (taking "the big risk" that small firms cannot take, providing an innovative benefit to society, producing economic growth that, advocates argue, would not otherwise occur).

It is an extremely high indicator of crisis with a financial system that, instead of discovering market prices, is set to massively oscillate with the mass economy-of-scale movement of capital to keep discovery of value a manipulation of risk-perception. Risk, and valuations, change by narrative of the risk accompanied by the mass movement of the consolidated capital.

Discovering a bubble has been reduced to a "flash" of buyers remorse, and the legitimacy of the outcome reduced to a post-hoc narrative, technically descriptive of the valuation but without indicating the gamma accumulation of the risk.

Ignoring the gamma-risk accumulation, emphasizing the avoidance of alpha risk with the benefit of pursuing economies of scale, is causing a problem of crisis in a high-frequency proportion.

Fixing this problem (lowering the gamma-risk indicator) requires a deconsolidation of financial markets and disaggregation of the capital (disaggregation of the risk).

Electronic trading and volatility in a flash (an effective counter-measure to mass movement and momentum indicating--discovering the price for--a market position), now up to about 70 percent of volume, is not well understood because it is a dark-market operationalized with the risk-narrative and the consolidated movement of the capital. Deconsolidate the market, disaggregate the capital, and the insidious effect of dark-markets reduces with the gamma risk.

Massive oscillations indicate massive induction of risk into a crisis proportion. The crisis (the risk) is then explained as an unavoidable ontology in which the costs and benefits legitimately accrue in zero-sum. It is a false ontology (a false induction of risk) in which the risk is tested post hoc in narrative form (after having been formed, or caused, the hypothetical risk is transformed into declarative knowledge). What would otherwise be the test of an alpha-risk ontology (laissez-faire economics) is deliberately transformed into gamma risk (command and control).

Retail investors need to understand that financials are operating in zero-sum. Economy-of-scale firms will act to consolidate capital even if it results in a short-term denominative loss. The enumerative consolidation (the crisis) is what is critically important. It is an absolute value that increases the economy-of-scale efficiency, reducing alpha-risk distribution and pluralistic accountability.

A descriptively "fair and orderly" market is determined by whoever has the greatest economy of scale, hands-on.