David Lykken: Volatility -- What do we attribute it to?

by MPA26 May 2014
By David Lykken
Special to MPA

Last week on my radio show, we were discussing the volatility of the market in the previous week. I had noticed quite a bit of fluctuation in MBS prices. There had been a big spike in rates, and I was curious as to what might have caused it. Then, one of my co-hosts said something that got me thinking -- he said that he didn't know what to attribute the volatility to.
As humans, we tend to see patterns in everything. Everything is a sign. But, sometimes, the reality of it is that there is no pattern. Sometimes, there is no discernible cause. Coincidence happens. Especially in the market, randomness happens and we are better off recognizing it as such than trying to make sense out of something that is meaningless.
As a consultant, it is my job to provide solutions. It's my job to have the answers. As you can probably imagine, then, it is incredibly difficult for me to say, "I don't know." I want to keep searching, keep digging, and keep prodding until I figure things out--until I find the pattern. But, occasionally, I have to admit that there is no pattern to see. I have to admit that there is randomness in the market.
When we look at the volatility of the market, it is always best to take a moment and think about why it is happening. Is there a logical explanation? Are there events that have transpired to which the volatility can be attributed? Or, is it just coincidence? Asking these questions and being honest with ourselves about the answers can spare us from making unnecessary and harmful changes. Let's not kid ourselves. Sometimes, the market is random--let's call it like we see it.


David Lykken is 40-year industry veteran who has been an owner operator of three mortgage banking companies and a software company. As co-founder and Managing Partner of Mortgage Banking Solutions, David consults on virtually all aspects of mortgage banking with special emphasis executive leadership development, corporate strategic direction and implementation as well as mergers & acquisitions. A regular contributor on CNBC and Fox Business News, David also hosts a successful weekly radio program called “Lykken On Lending” (www.LykkenOnLending.com) that is heard each Monday at noon (Central Standard Time) by thousands of mortgage professionals. Recently he started producing a 1-minute video called “Today’s Mortgage Minute” that appears on hundreds of television, radio and newspaper websites daily across America.




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