The Week in Review -- October 8, 1999

The Markets

  10/1 Close 10/8 Close Change %Change
DJIA 10,273.00 10,649.76 +376.76 +3.67
S&P 500 1,282.81 1,336.02 +53.21 +4.15
Nasdaq 2,736.85 2,886.57 +149.72 +5.47

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Of Rats and Monkeys
by Jerry Thomas (TMF Cheeze)

Greetings, Fools.

The human brain -- and let me apologize in advance to any humans who might be in the audience -- is stupid. You hear me? Stupid, stupid, stupid.

You know why? Because it creates meaning where none exists. You make it look at clouds all day, and it starts imagining dragons and butterflies in the puffy shapes. Make it watch the stock ticker for six and-a-half hours, five days a week, and before you know it, it's inventing little melodramas about buyers and sellers locked in mortal combat, or telling stories with cliffhanger endings about Alan Greenspan's latest hiccup. Play your Beatles records backwards enough times, and it'll be telling you Paul McCartney is dead.

It's a fact of life: The brain sees patterns where there aren't any.

Now, be assured that I count myself among the afflicted. (If life is a cosmic highway, then I've been driving with my left turn signal flashing for the last 400 miles.) But what is even stupider is that our society actually pays a bunch of very intelligent people to sit around all day making up pointless stories to explain the day-to-day activity of the stock market. We in Fooldom call these people the Wise Financial Press, and their job is to look smart and reassuring while assigning meaning to a single day's market activity, a place where little significance exists. In Wednesday's Rule Breaker, top Fool David Gardner lampooned the financial media's silly conventions for explaining how "The Market" behaves. The Market thinks this, or The Market did that, says the financial press, as if The Market were a single rational being possessed of a single mind and a sure grasp of the principles of reason. Go read David's piece, because even as a joke, it makes a lot more sense than most of what passes for actual thought these days.

It can be a lot of fun playing games with these stock media conventions. Bill Mann (TMF Otter), playing amateur psychiatrist in Wednesday's Fool on the Hill, even managed to put The Market on the couch. His diagnosis? "Mr. Market Is a Manic-Depressive Idiot." Hard to argue with that, considering this week's meltup, which followed so quickly on the heels of the previous week's meltdown. "We're doomed!" screams The Market. "No, wait. We're not. Sorry. Go back to what you were doing." It's strange how we forget even to question this irrational behavior, as day after day we watch well-dressed people on our television screens commenting on a meaningless, randomly generated stream of data. And we pretend it has some real importance to our lives.

Hello? Day to day, the market never makes sense. It is only in the long term that any sense can be made of it.

So try David Gardner's multipart series on The Psychology of Investing. Here we've collected David's ongoing musings about your mind and the market, and how the illusions your mind creates can lead to common investing errors. Become aware of the brain's vulnerabilities, and you'll become a better investor. Hey, never mind investing -- you might even become a better person. Follow that series with a reading of Tuesday's Rule Breaker recap, where David shares some of the e-mail response his psychological lessons have generated. The story of the five monkeys you'll find in that report is worth the click all by itself.

The good news is that it's the weekend and the markets are closed, so we don't have to think about what The Market is thinking. Instead, spend your time reading something significant, like reading Wednesday's Fribble about one Fool's 50,000% long-term return and the lessons that came with it. Monday's Fribble by Joann Floyd (TMF Hunzi) is also worth your time, as she examines the tricks Las Vegas casinos use to keep you, like rats in a psychology experiment, pushing levers and hoping for a payoff that almost never comes.

Maybe that's what intelligence is, after all: the ability to recognize ineffective behavior, to replace it with actions that serve us better. Of course, don't take my word for it. I'm a Fool, not a psychologist.

Let me plug a couple of other worthy links before we finish things up for this week. First, there's Matt Richey's (TMFVerve) analysis of the latest blowout conference call from Yahoo! (Nasdaq: YHOO). Then there's Monday's outstanding Post of the Day, in which "Weaselboy2" describes what "Living Below Your Means" means to him.


Until next week,
Fool on!



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