The erratic and unpredictable behaviour of the occupant of the White House may be unprecedented but it has duly found slavish imitators among the denizens of Wall Street.
I say that because I checked the market before starting to write this and the Dow Jones Industrial Average (still the least representative but inexplicably the most popular stock market indicator). By the time I have finished it may well be up 600 points. Or, for all I know, down another 600. Who does know? Does anyone? And does it matter? Yes, I agree that it should. But when 2000 points down becomes 2000 points up in the space of a fortnight, how much sense does that make, and how can it really matter in the greater scheme of things?
The question is whether there actually is a greater scheme of things. If there is, I am not aware of it.
On one recent occasion, I think last week, the Dow recorded a swing of 700 points in one day. Financial commentators on television, who talk for hours on end without pausing for breath and without saying a thing, seemed unusually bemused. Who can blame them? Even the Big Swinging Dicks on Wall Street don’t seem to know what is going on.
The Street is not now, and never has been, a bastion of sound common sense instructed by profound analysis, even if stockbrokers constantly urge us poor investors to adopt those very virtues before we hand over our cash. Nor is the stock market any longer, if it ever was, a haven in which the average Joe, so long as he took a longish-term outlook with every expectation of a decent return, could invest whatever extra cash he might possess for his old age – least of all with the patriotic assurance that in the process his dough was funding vital industries.
The market is now more than ever an exhilarating fairground ride, a playpen populated by computer quants armed with incomprehensible algorithms that they themselves barely understand and riverboat hucksters masquerading as hedge-fund managers who need to understand little and in many cases do not even get that far. Some of them are very clever; few of them are very smart.
Perhaps Wall Street has always been this way but just operated in times gone by with cruder technology and on a smaller scale. Whatever the case, all I know is that I sometimes check the market before lunch to find it 500 points in credit only to check in again after lunch to find it 500 points in deficit. Rationalise that, if you will. Just a few years ago, moves of that size would occur only over months. Then the months were reduced to weeks, and the weeks to days. Now the days have become hours.
I can still just about understand simple-Simon explanations like Trump’s imposition of tariffs on Chinese imports threatening a trade war. But if that is what the market is worried about, why does it not just go down, as far down as it thinks appropriate to the trade situation, and stay there. Instead of going down and then immediately bouncing back up to where it was, and only to repeat the whole process the next day.
If Wall Street analysts call a market fall of more than 10 percent a correction, what is the name for the subsequent reversal? There isn’t a name. Confusion reigns.
My wife frets about these things, thinking about our ‘nest egg’, such as it is. I would fret, too, if the market behaved rationally and gave ground on genuine economic concerns backed by intelligent analysis and refused to go back up again until the concerns had been resolved. That would mean we all ought to start worrying. But when it goes up and down with the frequency of a brothel elevator it means precisely nothing – other than turning the more sensitive among us into a state of gibbering idiocy.
John Kenneth Galbraith I am not, but my theory is this: there is too much money in the market and not enough sensible places in which to place it. So, it just sloshes around, satisfying the needs of nameless people who need non-stop action to justify their jobs. As we all know, nature abhors a vacuum. So do markets.
Even Donald Trump probably knows that, which may be why he puts his dough into property.