The broad, large-cap US stock market (S&P 500) is up 14.3% from this date last year

[swag]

and is up 2.7% year-to-date.

Add a 1.7% annual dividend yield for the S&P 500 since this date last year, and the index has returned about 16% for an investor.

The market may decline further, but what we have seen thus far is merely the return of volatility and not a "crash" by any stretch. A crash will certainly come in the future - next week or 30 years from now - but we haven't seen it this past week.

[MannyGoldstein]

1. My Concern Is That Volatility Might Force A Crash

I suspect that there are a lot of derivatives in hedge funds out there that go very, very bad when the market gets unusual. Think of hundreds of LTCMs, waiting to explode.

[swag]

4. Yeah, derivatives do present some problems, and have done so since their invention,

but stock volatility is at only a near-term high, and greater volatility, not so long ago, represented nothing so much as a buying opportunity for stock investors.

The mortgage contagion may spread, but it hasn't happened yet.

http://finance.yahoo.com/q/bc?s=%5EVIX&t=5y&l=on&z=m&q=l&c=

Greater calamity may ensue, as Krugman points out below, but DU schadenfreude over wealth destruction is premature.

http://economistsview.typepad.com/economistsview/2007/07/paul-krugman--2.html

As Krugman points out, bad credit, pricey oil, and the exclusion of working Americans from a share of the last few years' growth in wealth are the big threats to our economy now.

[swag]

5. Yeah, derivatives do present some problems, and have done so since their invention,

but stock volatility is at only a near-term high, and greater volatility, not so long ago, represented nothing so much as a buying opportunity for stock investors.

The mortgage contagion may spread, but it hasn't happened yet.

http://finance.yahoo.com/q/bc?s=%5EVIX&t=5y&l=on&z=m&q=l&c=

Greater calamity may ensue, as Krugman points out below, but DU schadenfreude over wealth destruction is premature.

http://economistsview.typepad.com/economistsview/2007/07/paul-krugman--2.html

As Krugman points out, bad credit, pricey oil, and the exclusion of working Americans from a share of the last few years' growth in wealth are the big threats to our economy now.

[Nite Owl]

2. I agree

volaitity has sure returned. Usually these summer months are rather quiet. This is not a 'crash' by any means. Dangerous waters but then that is the nature of the beast.

[swag]

6. The plunge of July 2002 was one of my happiest times as a buyer of equities.

But you're right - there are no guarantees with the economy or with life.

[MadHound]

3. You're correct, we haven't seen it this past week

But it is quite possible that a crash will happen much sooner than thirty years.

Greenspan's patch may finally be blowing wide open. Back when the tech bust took place, Greenspan funneled all of that excess investment money into the housing market letting the low dollar investors take the brunt of the damage while the big money went off and pumped up the housing market thanks to low, low interest rates. Low interest rates also fueled the financial sector, prompting a wave of not only massive consumer credit, but also an expansion in the size of the financial sector in our economy. It is now the largest component of our economy in fact, outstripping the manufacturing sector easily.

Now that the housing bubble is bursting, both the housing market and the financial sector are crashing. The sub prime crash and burn isn't over with yet, and it will defininetly take down some names. Beare and Stearns are only the tip of what is coming. In addition the wild, wild west of hedge funds needs only a push to blow up all over Wall Street, and sub primes could very well give one. More problems compounding themselves.

This could easily get very ugly, very quickly. Add to this the huge drag put on the economy by an enormous debt and trade defecit, with a weakening dollar and things really looking all that rosy.