In a TheStreet.com($) story with the above headline (hat tip reader MIchael), Doug Kass noted that the price increase in the Financial Select Sector SPDR was 13%, an 11 standard deviation event.
According to Kass, the odds of an eleven standard deviation event is equivalent to the world ending – between three and four times.
We noted in an earlier post:
Reader Juan provided this quote from presentation by Frank Veneroso last year to the World Bank:
[O]ne may ask, is it a bubble? Two years ago the noted money manager Jeremy Grantham posed this question in an interesting way. He presented a chart of the real inflation adjusted oil price going back to 1875.
He then noted: “Over the years we have asked over 2000 professionals for an exception to our claim that every asset class move of 2 sigmas away from trend had broken, and not one of the 2000 has ever offered an exception! This should be scarier than the fact that GMO has tried so hard to find one and failed. But we always have said that intellectually you can imagine a paradigm shift in an asset class price, even if we have been unable to document one yet in history. …
Financial stocks are not an asset class, so they may tolerate larger moves before exhibiting mean reversion. But no matter how you look at it, 11 standard deviations is a pretty big move.