STOCK MARKET JOURNALISM….Stock market journalism has gotten past the point of being ridiculous and has now entered the realm of total fantasy. I was going to post about it this morning, but Megan McArdle beat me to it:
Can everyone stop writing posts/articles on how the last ten minutes activity in the stock market proves their belief that the war is won/doomed? First of all, no one writing any of those “Stocks up on hopes of a quick resolution” headlines took a poll to find out what the millions of investors who set the stock prices by buying and selling individual shares of stock, was thinking. They’re just guessing, mostly based on what they think would have caused them to buy and sell if they were people who had money, instead of journalists.
On Friday stocks were up because no Americans had died yet in Iraq. On Monday stocks were down because it turned out the Iraqis were going to fight back after all. Tuesday morning they were up because news from the front was mysteriously somewhat better than 12 hours before. Now, this afternoon, stocks are back down because….the Senate voted to cut Bush’s tax cut in half.
Sez who? “Analysts,” of course. There are two primary possible explanations for all this silliness:
As Megan suggests, journalists just make this shit up.
Big institutional investors really do react instantly to news like this. In other words, they are flakier than we imagined, even after the emperor was unclothed during the dotcom bust.
I’m not sure which of these I’d rather believe, but sure as hell someone comes out of this looking like an idiot. I can’t think of any rational reason why allegedly sophisticated investors would buy or sell, say, Procter and Gamble based on whether a war in Iraq happens to be going well during a particular 24-hour period, but if they aren’t, then I can’t figure out why journalists would feel it necessary to make this stuff up.
However, one conclusion you can draw is that the average joe is actually more level headed than most of the experts who run the country. Ordinary investors are apparently far better at sticking to a long-term investing strategy than most fund managers, for example, and ordinary newspaper readers seem much more level headed about the fortunes of war than the breathless reporters telling us about it. I’m not entirely sure what lesson there is here, but I’m sure there is one…..