Former hedge fund manager Andy Kessler laments the increasingly volatile stock market, laying blame at the feet of the government and the Federal Reserve, while not holding out much hope for things to change anytime soon in this Wall Street Journal op-ed.

The Yo-Yo Market and You

Bull markets, it is said, climb a wall of worry. Smart investors buy in early when worries about profits or inflation or wars scare away the faint of heart. Latecomers then bid up stocks as each worry becomes unfounded, until there is nothing left to worry about. Once there is only good news, the market peaks as there is no one left to buy.

Bear markets, on the other hand, fall into what I like to call the pit of doom. Forget about worries—actual bad stuff happens, until nothing bad is left to happen and the market bottoms as there is no one left to sell.

From early May through last week, the market dropped 1500 points into the pit, on the backs of gushing BP oil, riots in Europe, a 30% drop in pending home sales and the news that maybe your next door neighbor is a Russian spy. But now we’ve seen 680 Dow points added over seven straight up days before a slight decline yesterday. What the heck is going on?

Call it the yo-yo market—from the top of the wall to the bottom of the pit and back—and you better get used to it. It’s hard to tell which market moves are real and based on prospects for better profits, as opposed to moves that are driven by all the extraordinary government measures to prop up the world economy.
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Until public policy returns to some semblance of stability, or at least more certainty, get used to 1000 point swings. Get used to the fans of gold and canned goods leading us to the pit of doom one week and bullish optimists up the wall of worry the next. For me, I like to get my bad news over with.

Getting the bad news over with would mean seeing even worse things happen in the U.S. economy, what seems quite unlikely given that the government has an apparently unlimited credit line and the central bank has a printing press it has made clear it knows how to use.