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Please, just stop it with the nonsense explanations for daily changes in the stock market

The bullshit just never stops:

So, investors supposedly panicked yesterday about COVID-19 even though there was nothing new going on, and then today they all took a deep breath and decided COVID-19 wasn't so bad after all. Seriously?

I wonder if anyone realizes that this kind of thing makes investors look really stupid? The truth, of course, is that no one knows why the market plunged yesterday and no one knows why it recovered today. But I'd say the unlikeliest explanation is a massive, coordinated, one-day freakout over a coronavirus variant that's been around for months.

27 thoughts on “Please, just stop it with the nonsense explanations for daily changes in the stock market

  1. Ken Rhodes

    Most people ALWAYS want an explanation for something that happened.

    My wife is a highly trained medical professional, with many years of radiology experience in large hospitals, working with expert doctors in heart surgery, cancer treatment and surgery, lung treatment and surgery, and neurosurgery. Yet, with all that background and experience, when something bad comes to someone she knows and cares about, she wants to know WHY.

    Why did Mother get cancer? Why did niece get a glioblastoma? Why did cousin get kidney failure?

    The concept that shit just happens is alien to the thinking of most people, including a lot of very smart people.

    1. Lounsbury

      Quite.

      People remain simply apes in the end, with a mere façade of rational and logical thinking. But it is but a façade for all of us, no real exceptions.

    2. kenalovell

      Akin to the frenzy of frustration evident in people who can't bear the idea we might never know where the pandemic virus came from.

    3. limitholdemblog

      Plus, it's a sport. Compare stock market coverage to baseball coverage. It's the same thing.

      The Wombats won today. "Huge! They're on track for the world series."

      The Wombats lose tomorrow. "The Manager is going to have to start making adjustments. There's a crisis in the Clubhouse!"

  2. akapneogy

    "I wonder if anyone realizes that this kind of thing makes investors look really stupid?"

    It isn't investors driving the market on days like yesterday and today, it is the traders. And traders act on a whole range of cues, market fundamentals isn't one of them.

  3. politicalfootball

    Without disputing Kevin's actual point, which is correct, the smaller stocks got clobbered yesterday, while the big ones ... also got clobbered, but noticeably less so. That's consistent with the idea that concerns about future lockdowns, etc., caused the slide. In an uncertain environment like ours, there's nothing particularly shocking about market sentiment changing -- even by a lot -- from day to day.

  4. Salamander

    Paul Krugman (Nobel winning economist) discussed that in today's newsletter. He noted that the stock market is most often irrational, displaying lots of herd behavior. If you want a better economic indicator, look at the bond market ... which has shown zero signs of panic, whether over covid, inflation, whatever.

    In my own opinion, the stock market moves on greed and fear.

    1. ScentOfViolets

      Yeppers:

      The other is that the effects of the economy on bonds are clearer than the effects on stocks. The prospect of a boom raises expected profits, which pushes stocks up — but it also raises expected future interest rates, which pushes stocks down. Stocks can therefore go either way; but interest rates on long-term bonds, which mainly reflect expected future short-term rates, give a clear indication about which way investors think it’s going.

      Which, come to think of it, is why these wights never say anything about the bond market.

    2. bbleh

      But of course they display herd behavior, precisely because they make their money on ... the perceptions of the rest of the herd!

      For buy-and-hold investors, and for large institutional traders who don't want to constantly be turning over their entire portfolio, it makes sense to pay attention to longer-term "market fundamentals" and individual corporate situations. But for many traders -- including the over-stimulated 20-somethings who are under constant pressure to show maximum return through some brilliant "strategy," it's very moment-to-moment, which means they make money based on what other moment-to-moment 20-somethings are thinking, i.e., the rest of the herd. And much of that is based in turn not on fundamentals or on close study of the individual corporations but on rumor and tips and logrolling and too much coke. Trying to predict that sort of churn from the outside is like trying to predict random numbers.

      All that said, however, it ain't the traders who look foolish; it's the "business reporters," many of whom are merely camouflaged stock touts. They're salesmen. And salesmen ... don't really care if they look foolish, as long as they make the sale.

      1. kenalovell

        Exactly. 'Investors' don't cause day-to-day fluctuations. They're the work of professional gamblers, AKA traders.

      2. kaleberg

        You might compare them to sports announcers who, having air time to fill, speculate on what the pitcher/manager/coach/player is thinking, what he or she might do and so on. Sports fans aren't massively stupid. They know the rules of the game and something about how it is played. A good sports announcer can keep the listeners rapt until something finally happens, a skill ever more important as the elapsed time to play time ratio keeps rising.

  5. Krowe

    There's a lot of traders who capitalize on this kind of volatility. They got rich during the roller coaster under T****, and they're getting rich now.

  6. mistermeyer

    Programmed trading tends to skew trends, even further than traders themselves, who look at someone else selling or buying and think "Hmmm... What do they know that I don't?" Hilarity and panic buying/selling ensue, until the next day (or week) when everyone sees an opportunity to either buy or sell. In the long run, though, almost all investors believe in magic money, that the stock market will always go up, and they'll always flock back.

  7. NeilWilson

    There are two kinds of people:

    People who don't know why the stock market went up or down

    and

    People who don't know they don't know why the stock market went up or down.

  8. frankwilhoit

    Investment is a form of gambling. That is the best that can be said of it, and it is also the worst that can be said of it.

  9. raoul

    Everyday trading is done mostly by traders who follow technical models. Basically mathematical models based on prior histories, so yes, the market moving 3% percent one day and 2% the next has nothing to do with fundamentals, at least not directly.

  10. D_Ohrk_E1

    I saw competing explanations. One suggested it was COVID while the other suggested it was fear of inflation. I mean, geez.

  11. Pittsburgh Mike

    It's panic behavior, right? I mean, Delta's been in the news a while, but then a drop starts, and speculators think "maybe this time it's going to be a long term panic, so I'll sell." And then it peters out. So, maybe it is a bit because people are worried about Delta, but really, we're just talking about a noisy random walk.

  12. Justin

    Journalists are so full of themselves. They think they are saving the world from evil and corruption. But mostly they write nonsense like that.

    And this too!

    “I share all that to say this: Democracies cannot survive without a common set of facts and a vibrant press to ferret them out and present them. Our democracy is in terrible danger. The only way that lies can flourish as they now do is because the press has been diminished in both scale and stature. Lies advance when truth is in retreat. The founders understood the supreme value of the press, and that’s why they protected it in the Constitution. No other industry can claim the same.”

    https://www.nytimes.com/2021/07/18/opinion/media-newspapers-democracy.html

    And of course Fox News is the worst of all.

    1. Special Newb

      Except of course that except for a few decades that are outliers the press in this country has always been stupid and sensationalist and agenda driven.

  13. Special Newb

    Maybe shit happens.

    Or maybe its finally got through to them that coronavirus is surging and vaccinated people can get sick (though very very unlikely to die) and they freaked out over restrictions coming, then realized the populace has lost patience with lock downs and no restrictions will be imposed. Either seems plausible.

    And before you ask I am totally comfortable with shit happens. It's not a moral disease. What happens when you catch has a strong component of luck.

  14. pjcamp1905

    Don't confuse business journalists with investors. Journalists don't have a story if they don't have an explanation. Noise is not an explanation. Investors are somewhat more reasonable, recognizing that lemming moments exist but in the long term it all evens out.

  15. kaleberg

    When I was a kid, back in 1961, the thing was The Great Fluctuation. The market plummeted for no apparent reason, then it recovered. No one ever figured out why, and, back then, trades were done manually by people yelling at each other on the stock exchange floor. No one had a clue. The joke going around was "Investors were fluct again".

  16. theAlteEisbear

    Perhaps a lot of people are really stupid despite the fact that they have enough money lying around to gamble in the country's largest gambling house. Who knows?

  17. Vog46

    Kevin I fixed the story for you:

    Please, just stop it with the nonsense explanations for daily changes in the COVID numbers

    The bullshit just never stops:

    So, Drum readers supposedly panicked yesterday about COVID-19 even though there was nothing new going on, and then today they all took a deep breath and decided COVID-19 wasn't so bad after all. Seriously?

    I wonder if anyone realizes that this kind of thing makes my readers look really stupid? The truth, of course, is that EVERYONE knows why the numbers rose yesterday and EVERYONE knows why it continued today. But I'd say the likeliest explanation is a massive, coordinated, one-day freakout over a coronavirus variant that's been around for months.
    *****************************************

    I would suggest a slight decrease in the Jon Hopkins numbers related stories.....

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