One last time. Thank You to Dr. Robert Engle's Volatility Institute

First, Thank you to Dr. Robert Engle's Volatility Institute at Stern Business School NYU and its supporters, for allowing me this venue, and the ability to interact with my academic friends during meetings I attended there and at the NY Fed.  Wonderful experiences and people.  Keep up the great work.

S and P 500 sideways to up from here, approaching recent highs.

Look what showed up in the Bradbury Museum in Los Alamos. I honor my late father A.J. Klapetzky

If you would, please kindly allow me this one time, to deviate from the market. This is BEAR, as it was leaving Los Alamos National Laboratory on its way to White Sands Missile Range. It is now I understand at the Bradbury Museum back home in Los Alamos.  It was shot into space, tested and recovered.  A "Star Wars" Strategic Defense Initiative project from Los Alamos National Laboratory.  At its core is a  particle beam device that I watched my father tinker with in his Lab at LAMPF, and eventually get to work- to everyone's surprise. He was deservedly proud of this accomplishment, and I of him.  Never thought I'd be able to talk about it. Strange coincidence that I found this out the same day I found out that Voyager 1 is about to leave our Solar System.  Data from Voyager was what I was looking at as an 17 year old intern in the Astrophysics division at LANL at the same time (1984).  A cosmic yin yang it seems.  73-s Dad.

I TOLD YOU SO... i told you so. 12/1/08

Volatility incredibly high. It will end in the near future. There will be a relief ralley of sorts, then we will have a sucker punch come out of left field seemingly. That will be the end of the phase transition; and we will have a new market with new leaders, and the rational optimizers will be in charge for a while.

1/7/08 System "Critical" and susceptible to six sigma event.

As I said volatility was expensive and there would be an explosive move. It happened, a head fake ralley and volatility cheapened. Well the New Year arrived, and volatility has once again increased, and the system is critical.

The market is susceptible to a six sigma crash currently, at any time from some unforseen event. The biggest risk is the unforseen risk, as always. Interesting times globally. Cash is king in my book, even if it is a weak dollar.

SECOND PHASE PEAKING. ITS A HEAD FAKE.

SECOND PHASE PEAKING AS I ORIGINALLY DESCRIBED THE CHAIN EVENTS IN PREVIOUS POSTS.

SHORT TERM REVERSAL COMING UP. ITS A HEAD FAKE. THE LEMMINGS WILL BE DRAWN IN AGAIN FOR THE SIX SIGMA EVENT AHEAD.

IT IS THE FINAL REVERSAL BEFORE THE CRASH. TIME NOT DETERMINABLE, BUT IT IS TIME TO SHIFT THE RISK TO OTHERS. VOLATILITY AT THIS POINT IS EXPENSIVE. THAT WILL CHANGE IN A RAPID VIOLENT MANNER.

Even a unforeseen surprise , will not surprise.

Volatility to continue, within slightly elevated levels. Not a high degree of correlation with participants. "Rational Optimizers" in charge of this market. The real estate market here in Florida is another issue. LOL! It is funny to watch how people chase returns after the fact, and leverage up with an asset that has already run up. Sound familiar? Reasonably valued Cash generating assets, with good balance sheets are king. Find cash flows that you can quantifiably confirm have the fundamentals beneath them to confidently, and consistently generate expected cash returns.

I am not excited about indices, but even at this point we are not in a "phase" that would be susceptible for a large catastrophic avalanche of volatility. No six sigma or greater events on the horizon within the S&P 500.

Short Term Volatility within expected bounds

Yesterday Dow down 140+. This morning futures down big. To be expected with current news. Market will absorb it and behave within expected volatility parameters; system is not critical and will not "crash" at this point.

I repeat, remember the ABC's that I mentioned earlier. A rigorous application of traditional deep value metrics is, and will be the way to go.

Clarification: Nobody will ever be able to say with certainty that a complex dynamic system will have a six sigma or larger event in a specific time period; the best one can do is understand if the system has reached a point of "self organized criticality" and is then susceptible to a large event. The latter in of itself is of great value as you can hedge, and in parallel the system has reached a point of diminishing returns and decisions regarding asset allocation can be made more effective.