David Post has an excellent, uh, post at Volokh about how the media casually explains daily fluctuations in the stock and bond markets without a shred of evidence to support them:
Pretty much every day, in pretty much every newspaper in the country, there is a story that goes something like this [taken from todays WSJ]: "Yesterday, the Dow Jones industrials fell xxx points to yyyy on new concerns about interest rates and anxiety over North Korea's missile tests." Or the Dow rose, due to "increasing optimism about prospects for peace in the Mideast." Or whatever. It's complete and utter nonsense. The market did in fact fall yesterday. But how could anyone possibly know that it was due to "concerns about interest rates," or "anxiety about North Korea's missile program"? Hundreds of thousands -- millions -- of individual trading decisions go into determining whether the market goes up or goes down on any given day. I don't get it -- I really don't. Are we really so desperate to believe that we can explain everything that we take some sort of comfort from stories like these?
The answer is yes. And as someone who watches the market every day, these little flippant explanations always drive me crazy too.
Don't be too hard on the reporters. They're basically just repeating the hype of coporate stock "experts" at the banks and so forth. You know, the guys and gals that get to hype this stock or that based on "research" they conduct by smugly calling each other and screaming at their secretaries all day long.
When it comes down to it, it probably all ties into the primal human need to put a personalized story onto each and every event.
This really irritates me too. Especially when the change is positively minute either way.
I don't remember the exact quote, but I remember Dave Barry nailing this in the 90s with something like "Stocks tumbled today on the news that Jupiter has twelve moons."
See, if I was a reporter I'd be tempted to do that every day. "Stocks fall today on rumors that Dan Aykroyd is considering making a second Blues Brothers sequel" or "Stocks rose today after CEO of Goldman Sachs had a really good breakfast."
I think the greatest irony is that some readily accept these flippant explanations and yet go absolutely ballistic over evolutionary biology, global warming, or any other area of science they dislike, despite the fact these areas of sciences are based on real, testable, data. It's faith in the stock market and distrust of science, running everything through the ideological filter.
My all time favorite, collected from Reuters Business news years ago, was two consecutive paragraphs, one on the bond market and one of the equities market. The bond market paragraph said (in effect) 'interest rates climbed today on worries about increasing inflation', while the equities paragraph said (in effect) 'stocks climbed today on low inflation expectations'. Do editors still exist?
On his PBS show, the late Louis Reukeyser used to have his panel of experts prepare predictions and portfolios at the beginning of the year, and then at the end of the year discuss how well they each did. Some did remarkably well--for 1 year in a row. That show eventually convinced me that the experts were almost as clueless as I was.
I see a new Jon Stewart bit: "Today stocks were [up/down] on news that...[insert nonsensical factoid.]" (Audience laughs).
If all the stock market gurus selling advice were as wise as they claim, they wouldn't be selling that advice but keeping it for themselves and clipping coupons. The peddling of stock market analysis usually has as much substance behind it as the latest assessment of the nation's condition by Pat Robertson. Anyone who takes the advice and conclusions seriously has a bad case of gullibility.