Market volatility felt locally

October 10, 2008 4:41:18 PM PDT
Most believe fear and uncertainty are playing big roles in the volatility of the stock market. Those who study human behavior say confidence in our banks, our credit allow us to make purchases. That confidence has eroded here and around the world. Many are now looking for a way out.

The volatility of the markets is exemplified at one pit at the Chicago Board Options Exchange where traders buy and sell based on what they believe will be the highs and lows of the stock.

There have been record days here in recent weeks. It's hard to watch for some on the outside.

"When you look at the volatility of the market, it's really difficult to make that change. Because you see those ups and downs and ups and downs and you don't want to do anything. And sometimes you're frozen," said Teresa Klier, a marketing research consultant.

Klier and her family were in the midst of adjusting their financial plan before the dramatic drops in the markets. Now her planned mutual fund moves are on hold.

"I think I'm just going let it sit. And hopefully things will get better," said Klier.

Alaron Trading focuses on future and options on commodities.

Traders are hearing nervousness from clients, even if they're not heavy into the stock market.

"It's not so much that the things that we're talking about have value or don't have value, it's the fear that they don't know what they're worth. So it's really a crisis of confidence," said Phil Flynn, Alaron Trading.

Professor Werner Debondt studies the behavior of financial decisions at DePaul University. He says fear is justified and those who take action may take their cues from others.

"In this completely uncertain environment, there are no clear guideposts. And that makes them very susceptible to doing whatever people around them are doing because they have a sense of perfection in that," said Debondt.

Professor Debondt says it is realistic to expect the markets will rebound although he won't speculate as to whether we've hit bottom or not. He says it was unrealistic optimism about home values that created the mortgage crisis and now the financial crisis.


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