Tackles the Mystery of the Good/Bad Thing
In one of
the best movies ever made, Egon Spengler explains to his fellow
Ghostbusters that they should not cross the streams when they’re
shooting ghosts with those laser-fire-type things they carry on their
Venkman wonders: Why?
be bad,” Spengler replies.
“OK, I’m a
little fuzzy on this whole good/bad thing,” Venkman confesses. But once
Spengler launches into an explanation of proton reversal or some such
thing, Venkman wisely concludes that he really doesn’t need the details.
bad,” Venkman confirms, and with his summation indeed affirmed, the
ghostbusting moves forward.
would get along fabulously on Wall Street, where no one can keep
straight what’s good and what’s bad. As the week of Jan. 22 concluded,
stocks were down because of bad news. What bad news? Interest rates
aren’t going to be cut, as had been previously expected.
economy is growing faster than “previously thought.” (Do these people
ever just wait and see?) The GDP is growing. Home sales are up. Orders
on big-ticket manufacturing goods rose, especially for commercial
aircraft. Earnings are good pretty much everywhere if your company isn’t
Horrible news! If the economy is good on its own, the Fed doesn’t need
to cut interest rates, and if interest rates aren’t cut, investors are
sad. So sad, that the Dow Jones industrial average fell 58.80, or 0.47
percent, to 12,453.76. The Standard & Poor's 500 index was down 5.15, or
0.36 percent, at 1,418.75, and the Nasdaq composite index fell 2.58, or
0.11 percent, to 2,431.66.
those people who always tell you that investing is a long-term
proposition that will succeed or fail based on the strength and
viability of the companies in whom you invest? Well, the people on Wall
Street don’t. Manufacturing orders up? Home sales up? Economic growth
Find me a
ledge from which to leap!
Oh, and it
gets worse. When the economy is growing really fast, the Fed starts
getting nervous about inflation, and that’s when they usually raise
interest rates. How is Mr. Wall Street going to deal with that?
is a fairly simple proposition, unless you’re a professional investor.
Because you, my friend, get paid to overthink everything. Manufacturing
orders up? Is that good? I can’t decide! If I say it’s obviously good,
like everyone else thinks, then what does anyone need an expert like me
for? I have to explain to the masses that it’s really troubling!
investors want to jump in and out of investments based on their
inability to determine whether the day’s economic news is good or bad,
fine by me. But maybe the rest of us should stop looking at movement in
the markets as an indication of anything meaningful about the economy.
Movement in the financial markets is driven by investment professionals,
who know nothing about investing and even less about economics.
So how did
they get there? Well, isn’t it obvious? No one would hire them to
actually run a company. They don’t even know if orders are good or bad.
They have to work somewhere. So have them stand around in New York
throwing pieces of paper back and forth. They really can’t hurt anything
doing that, and it doesn’t require them to understand anything. Which is
good, because they don’t.
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