Seeing Red

I wasn’t watching the markets yesterday when the DOW dropped 500 points. (Though it was down only 416 points by the closing bell.)

I’m glad I wasn’t watching. As it was, when a news bulletin trumpeting a 500 loss hit my inbox, my heart started to pound. I started wondering what had blown up or what had been shot down. After all, the last time the American markets had a day this bad was September 11, 2001.

Fortunately, no human disasters were involved with this plummet. (At least, that is, from perspectives outside of the market.) But trying to figure out exactly what did happen can be perplexing, even if you know what you’re looking at. I think it has to do with denial. Everyone wants the news to be good. Everyone has a vested interest in the news being good. And it’s like they believe that, if only they say it enough, it will all come true.

And protestations that part of the drop was due to computer error seems unlikely. Let’s face it: these are pretty swell computers we’re talking about. I can’t imagine that a bottleneck would cause even a small part of the drop we witnessed Tuesday. (And if it can, we’ve got a whole new set of problems to deal with.) It all seemed a little too “dog ate my homework” to me.

The problem -- one of the problems -- is that no one wants to be the one that gives the news so dark it starts the whole thing collapsing, house of cards-style. I can’t imagine why else everyone who writes about the market would be so cagey all the time.

Here today, from AP, is an example. Read the paragraph carefully and see if you can determine what it means:

Investors’ dwindling confidence was knocked down further by data showing that the economy may be decelerating more than anticipated. A Commerce Department report that orders for durable goods in January dropped by the largest amount in three months exacerbated jitters about the direction of the U.S. economy, just a day after former Federal Reserve Chairman Alan Greenspan said the United States may be headed for a recession.

See: if you look at this paragraph, read it a couple of times and kind of ponder it, the message becomes abundantly clear: the Federal Reserve Chairman (not someone generally known for impetuous public statements. In fact, you might even be safe in guessing that’s part of his job description) is worried that the United States is heading towards recession. Plus, the economy sucks more largely in general than previously indicated. Basically, you know, tighten your belts, boys, ‘cause shit is gonna hit.

And so the message -- that’s been getting funnelled down for the last several months, perhaps longer -- is more clear. And then the DOW starts to slide and it’s suddenly, you know, like crystal. And now the party is on: sell the stocks, grab the cash, then sit on your hands for at least a heartbeat -- maybe two -- and see which way this wind is gonna blow.

And how is this wind gonna blow? Well, that’s the bazillion dollar question, isn’t it? And the reality is, no one really knows. Or maybe, if they do know, they’re not saying. Denial, at a time like this, is so much prettier.

Here’s what I think; have always thought: the market -- real estate, stock, what have you -- is bounded by the same laws of physics that control all of creation. What goes up eventually comes down. And vice versa. It’s a good thing to remember, on a day like this, when it’s hard to see anything but red.

There is denial in the market; there always will be. No one ever wants to believe that the party is over. And if the party is obviously over, they don’t want to believe it won’t be starting up again any second. Don’t listen. So many people have a vested interest in the success of this party. Try to look beyond the hoopla: try to find the bigger picture (even if that means getting your money the hell out of Dodge while the dust settles).

I’m not saying the party is over, if you follow. I’m just telling you to try to read between the lines. What’s not between them isn’t always what it seems.


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