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so i got in the investment business about almost here's whisker less than 50 years ago i've been doing this stuff all my adult life and throughout that almost half century a fairly laughable statement that i've heard over and over and over and over again irregularly is that stocks are more volatile than they used to be uh usually this comes when stocks have had a plunge it down period and then people say oh my gosh stocks are more volatile than they used to be and in fact they may be more volatile than they were the month before short-term volatility bounces around regularly without any ability to predict and doesn't mean anything and if you've heard me often you know that i always say that short-term volatility doesn't mean anything but then the question of whether stocks are more volatile than they used to be forgets the longer-term history stocks used to be much more volatile than they are now much more volatile they were more volatile when i was a young man they were more volatile 20 years ago but they were more volatile 50 years ago and they were particularly more volatile 90 years ago if you go into the 1930s you had volatility that made anything that goes on today look minuscule and you can see this several different ways part in history is just the overall price movements as a percentage of market value in number of days over time how many days had one percent moves how many days had two percent five percent and the answer is over the decades we've been having fewer and fewer big percentage moves and that's because the markets become broader and more liquid and as it become broader and more liquid it can't be more volatile than it was when it was more narrow and less liquid moreover that doesn't mean better bull markets worse bull markets better bear markets worst bear markets it means it's not as volatile still volatile but not as volatile and at the same time there's this other feature when we look at stocks which is what's the spread between the bid price and the ask price for that stock relative to the split between the two of them and zero so i remember a world very commonly where stocks that traded around 10 and 12 often had two dollar spreads and in the 1930s and 40s it was common for a big percentage of the total stocks that existed in the world for a number of years to have 20 and 30 spreads between the bid price and the ask price you want to see volatility that's volatility it's somebody buying a stock one day trying to sell it the next day and have nothing really change but getting whacked by 20 or 30 percent where the bid ask prices stay the same that's volatility it's not that the stock was really going up or down and over my lifetime bid and ass prices have regularly gotten smaller still again that's more liquidity in a broader market we'll have volatility i hope forever because it's impossible to have actual free trading markets without volatility but the fear that it's more volatile than it used to be as some reason to do something is actually misplaced and always has been thank you
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