An Honest Stock Market Update

NEW YORK -- Stocks gained momentum on Monday, with the Dow Jones Industrial Average closing up 48 points, reversing losses from last week's decline. 

Experts hailed both moves as a "remarkable, textbook example of pure statistical chance," chalking up Monday's gains to a couple random marginal buyers being slightly more motivated than a few random marginal sellers. 

"Imagine you pick 1 million random people from around the world every day," said Toby McDade, chief investment officer of Momentum Fee Capital Management. "Some days, 51% would be in a good mood, 49% in a bad mood. The next day maybe it's the opposite. Other days, random chance could mean 8% of people are really pissed off for no real reason. This is basically what the market is on a day-to-day basis," he said.

Asked what his clients thought of this view, Mr. McDade laughed. "Oh my God, you think I could tell my clients that? How could I justify my salary?" Clients were told Monday's gain was caused by a mix of reversing geopolitical instability, shifting uncertainty patterns, a risk-on atmosphere, and a perfect storm of beta meeting sigma. None knew what those words meant. 

American corporations earned $4.62 billion of net income on Monday. Financial advisors, analysts, and brokers, collected $630 million in fees. No media outlet reported these figures, despite being the two most important numbers necessary to understanding investing.

A report from the Bureau of Labor Statistics showed the economy added 209,000 jobs last month. An economist from a right-leaning think tank called the report disappointing. Another at a left-leaning organization called it encouraging. Neither has a reputable track record. Both yelled. The jobs report has a margin of error of plus or minus 100,000, and will be revised seven times in the coming years. No one whose outlook was swayed by the report said they care about these details. 

Marc Faber appeared on TV predicting a 20% stock market crash within the next six months, repeating a call he has made bi-weekly since the Carter administration. Another pundit explained that his last failed prediction would have been right if only he hadn't been so wrong. Executives of financial TV networks met to discuss why ratings are at decade lows. 

The yield on 10-year Treasury bonds fell from 2.42% to 2.38%. Nobody knows why. 

An FDIC report showed banks increased lending last quarter. Analysts called this a new bubble created by the Fed, though it's what any rational person would expect to see happening during a recovery after a deep recession. 

In Nevada, 52-year-old Ronald Palmer put his life savings into gold after spending 10 minutes reading something on Google about inflation written by a guy who learned about inflation by spending 10 minutes on Google. 

Nineteen-year-old Travis Baker spent the afternoon day-trading penny stocks because his prefrontal cortex isn't yet fully developed and he couldn't recognize risk-reward trade-offs if they hit him in the face. 

An army of bloggers reported from their parents' basements that Apple CEO Tim Cook doesn't understand technology. Reached out to for comment, Cook giggled, shook his head, and said one of his main regrets in life is not taking the advice of unemployed anonymous bloggers. 

Long-term investors finished Monday one day closer to their goals. 

Analysts expect the news to be no different tomorrow.  

Check back every Tuesday and Friday for Morgan Housel's columns on finance and economics. 

*This article is fake, but just barely. 

 


Read/Post Comments (27) | Recommend This Article (226)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 12, 2014, at 11:40 AM, jordanwi wrote:

    lost it at the gold commentary.

  • Report this Comment On August 12, 2014, at 11:46 AM, meade78 wrote:

    Love your articles, Morgan!

  • Report this Comment On August 12, 2014, at 11:48 AM, notyouagain wrote:

    Morgan, you are so awesome! And FUNNY!!

    Way to shine a light on ignorance! I hope you never leave the Fool.

    Here's another stat for down-to-earth people smart enough to ignore the ones you just exposed the silliness of.

    Folks who purchased VZ 4 years ago and reinvested dividends until today now have a yield on cost of 8.5% and also look humorously at people who worry about the kinds of stats you were poking fun at.

    Or people who bought MSFT or IBM 4 years ago, who have also doubled their money if they reinvested dividends, and are currently enjoying a yield on cost in the range of around 6% now.

    I thank the Fool for playing a huge part in my personal learning curve and illuminating the importance of dividends in investing.

    Funny man. You could always be a financial comedian.

    Great article!

  • Report this Comment On August 12, 2014, at 1:40 PM, bdh2067 wrote:

    Great summary of media shenanigans and the nonsense that passes for 'reporting,' particularly on 24-hour cable networks.

    I realize your piece is satire, but it reinforces two key points that many experts and pundits miss:

    1. we humans are driven by emotion. We collectively delude ourselves that we are cool, calm machines. But investing is driven by the same unconscious biases and emotions that drive most of our purchases and major life decisions.

    2. 24-hour news means networks need to sound smart and give a reason for what just happened, much as CEOs or public companies need to give a 'smart answer' for their performance. It would be refreshing to hear someone say, "we got lucky this quarter" or "damn, we were way off on that idea."

    anyway... this was great. I love your work.

  • Report this Comment On August 12, 2014, at 7:10 PM, 2motley4words wrote:

    @notyouagain: As much as I agree with your suggestion that Morgan also has the chops for another occupation, I'd opine that the field of "financial comedian" is already over-populated---by brokers and the analysts on those all-day/every-day business networks.

  • Report this Comment On August 13, 2014, at 12:17 AM, Minow wrote:

    ""An Honest Stock Market Update"", LOL without charts!

  • Report this Comment On August 13, 2014, at 11:25 AM, drborst wrote:

    Morgan,

    One of your best. Two things. First is there a reason for mentioning corporate profits in the same sentence as financial advice fees? I knew fees were high, but 13.6% of the amount of corporate profits? Wow.

    Second, does the portion of a penny you got because I clicked on the article count as part of that $630 million?

    DRB

  • Report this Comment On August 13, 2014, at 11:54 AM, marketmap wrote:

    In 20 years, we hope to look back and say "equity in our tax deferred accounts using the the Map model with SPY and TLT have grown somewhere between 10.5% and 18.3% vs. between 6.6% and 15% on the S&P500".

    http://stockmarketmap.wordpress.com/2014/04/11/market-map-st...

  • Report this Comment On August 13, 2014, at 12:30 PM, CromulentBrad wrote:

    Call me a rube or a mark, but I'm choosing to believe every bit of this.

    Brad

  • Report this Comment On August 13, 2014, at 1:00 PM, Mathman6577 wrote:

    I thought Faber has been predicting a crash since the Lincoln administration?

  • Report this Comment On August 13, 2014, at 6:57 PM, IFLY2 wrote:

    Good column as usual...

  • Report this Comment On August 13, 2014, at 11:23 PM, MrCheeryO wrote:

    Buffett and Bogle and Fisher and.......Housel? Love your stuff, another great piece.

  • Report this Comment On August 14, 2014, at 9:18 AM, KKoleto wrote:

    OMG Morgan! So right on that I couldn't help laughing out loud.

    Many a day I see the talking heads on TV explaining why Mr. Market was up (or down or sidways). How in #### do they know? Change the channel, maybe get a different reason😊

    Thanks for the refreshing perspective, Morgan. Keep it coming...

  • Report this Comment On August 14, 2014, at 10:09 AM, Mathman6577 wrote:

    Some of the other Fools have different opinions. For example"

    http://www.fool.com/investing/general/2014/08/14/3-reasons-t...

  • Report this Comment On August 15, 2014, at 10:10 AM, TMFMarlowe wrote:

    "American corporations earned $4.62 billion of net income on Monday. Financial advisors, analysts, and brokers, collected $630 million in fees. No media outlet reported these figures, despite being the two most important numbers necessary to understanding investing."

    Love it. Exactly right. You rock, Morgan.

    John Rosevear

  • Report this Comment On August 15, 2014, at 11:33 AM, lovepeace wrote:

    Very "Madmen". Great.

  • Report this Comment On August 15, 2014, at 11:41 AM, hbofbyu wrote:

    The next Michael Lewis book should be written by Morgan Housel.

  • Report this Comment On August 15, 2014, at 12:20 PM, penchy1 wrote:

    Morgan you rock!

  • Report this Comment On August 15, 2014, at 12:24 PM, tprooney3 wrote:

    Since last week's move was a "remarkable, textbook example of pure statistical chance," is there any way I can hedge this using options or futures contracts? What if statistical chance is the new normal? The old normal? If I don't act on actionable information every five minutes, I just might end up being one of those long-term investors with out-sized gains!

  • Report this Comment On August 15, 2014, at 12:36 PM, akaboben wrote:

    Like!!!

  • Report this Comment On August 15, 2014, at 12:39 PM, n8larson wrote:

    This column just destroyed the meaning of the "Rec This" button for me. It should be required reading, and I second the sentiment on the next book. Love the style and the smarts.

  • Report this Comment On August 15, 2014, at 1:03 PM, somethingnew wrote:

    Ha! Good article...Your wisdom in these articles is awesome but seriously, you should look into writing the business news on the Onion. ;)

  • Report this Comment On August 15, 2014, at 2:55 PM, AmcnFndrs wrote:

    Hilarious and so true. Luv the Tim Cook quote - Thank you!

  • Report this Comment On August 19, 2014, at 12:20 AM, Llooped wrote:

    Fantastic piece! Thanks for the laugh.

  • Report this Comment On August 20, 2014, at 9:33 AM, JMSJMSJMSJMS wrote:

    Who needs The Onion when you have TMFHousel. Just make sure you use the Satire tag if you post it to FB - don't want to confuse any intellectual giants lurking there.

  • Report this Comment On August 20, 2014, at 9:48 AM, TMFHousel wrote:

    Thanks for the comments, all.

  • Report this Comment On August 21, 2014, at 11:44 AM, Goofyhoofy wrote:

    I'd love to see a video of a commentator doing this schtick.

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