“It was Keyser Söze, Agent Kujan, that is the devil himself! How do you shoot the devil ...

and if you’re wrong??” (Roger “Verbal” Kint).

“Keaton used to say: “I do not believe in God, but I’m afraid of him”. Well, I believe in God ... and the only thing I’m afraid of is Keyser Söze.” (Kint)

“The biggest joke the devil has ever done has been to convince

the world that he does not exist, and like nothing ... it disappears.” (Kint).

Taken from The Usual Suspects, a film by Bryan Singer.

After the heavy and sudden drops on Wall Street, stock exchanges have teetered on insecure ground. Three drops were enough, and the flat calm we have become used to in the past few years is already a fading memory, a reality that many believe is now buried. One looks at others with suspicion, ready to read every little signal like the warning of a strong and lasting movement.

It distorts everything; the macro data is indicative of a world that is about to end, that of low rates and inflation under control. A world that did not fear debt too much because financial burdens were in line. A world where volatility did not exist. And yet it exists, and nothing appears as before. The expenses were, primarily, derivatives. An ethn issued by Credit Suisse, which offered leveraged volatility instruments, jumped off with $ 1.5 billion. While this may not be a larger figure, it underlines that in recent years some even came to think that volatility could no longer explode building derivatives with insufficient margins. These are algorithms based on the idea that if something has not happened in the past, it will never happen. Never say never.

In the film The Usual Suspects, Keyser Söze, the killer most feared by the antagonists themselves, has made everyone believe that he does not exist. Instead, he is in their very midst and moves them around like pawns, unbeknownst to the characters. The others are dominated by fear and behave, unsuspectedly, as Keyser Söze wants. Until now, no one believed that volatility could be re-ignited. Volatility creates fear; nerves are tense and operators and markets make mistakes. One might sell in a panic and the next day regain the desire to recover. We no longer look at the numbers of the companies, at quarterly intervals, but observe other indices, first to Wall Street. To avoid fear, one must face it. One must admit that volatility exists, has always existed and if it were to become a regularity, it is only an indication that we are heading towards a phase of normalization.

Second, we must not fear volatility; we must manage it, increase protection and diversification. We must remember what it has caused in the past. Markets, generally, have always amended downward projections and investors have moved to safer ports. Despite these corrections, good actions (whether fundamental, solid, or with or without volatility) have always and will always rise to the surface. Quarterly after quarterly, the goodness of a stock will always be the accounts. And, so far, the US and European quarterly’s leave no doubt; the economy is doing well, it runs and does not fear great dangers.

Third, we must look straight to our goals. Volatility deceives. Every day we run to justify every movement. The newspapers are looking for the news that has created this or that movement. Often, they are already known facts, but they had not resonated before on the market. So, it is important to carefully examine the information.

It all started with the boom of people in the US. But the markets have read the as the end of low rates. The awakening of inflation is scary, also because central banks are warning that the rain-aid season is about to end.

On Friday, the Bank of England raised its estimates of growth, also anticipating a less accommodating stance on monetary policy: as economic growth is accelerating, the rate hike may be earlier than previously indicated. The pound has gained over one percentage point against the euro and the dollar.

The German Bund yield rose to 0.77%, the highest level since July 2015. BTP at 2.02%. The yield on the Treasury Bill is 2.86%. We are on the highest levels for the last four years.

Nothing is more normal. Living with the growing economy and yields that are trying to get back on inflation are bringing the world back to normal. Of course, there will be some air gap at high altitude, but this is the beauty of flying. The rest are well orchestrated suspects, but we must not fear-- we must look at the macro data that is solid and not volatile like the stock exchanges.