Halftime at CNBC

The difference between reading stock charts and reading chicken entrails is that you get to cook and eat the chicken afterward. Pontificating about short-term stock price fluctuations tells you remarkably little about the future. At least with the chicken, you can foresee what you're going to have for dinner.

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By Rob Landley (TMF Oak)
November 13, 2000

I'm told the stock market did "interesting things" over the past week or so. I wouldn't know. I was busy.

The market does interesting things every week, because whatever the market does is endlessly fascinating to a certain group of analysts who follow stock price fluctuations as if they were some kind of sporting event. These people are capable of being fascinated by a week where nothing happens, seeing deep significance in a temporary lack of activity as a prelude to something else. (Possibly a halftime show with cheerleaders, or a "triple witching day.") Always, they try to discern the future from the short-term movements of today.

If a stock is going down, momentum and general market psychology says it could go down further. On the other hand, as it becomes cheaper relative to its earnings, it becomes more attractively priced, a better buy, and people buying it would drive the price up. So, whatever happens, there are grounds to predict it -- retroactively, of course. (Predicting the future correctly is simple: Interview two people with conflicting opinions, and bring back the one who won the coin toss to congratulate afterward. Wheee!)

Professor Peter Schickele has a wonderful bit called "New Horizons in Music Appreciation" on the album The Wurst of P.D.Q. Bach, where he and a friend cover the performance of one of Beethoven's symphonies as a sporting event. ("And they're off, with a four-note theme....") I'm waiting for somebody to do this with a stock ticker. There's a reason so many newspapers put the business section next to the sports pages.

After a while, it gets hard to take it very seriously. Apparently what everybody's currently excited about is the recent drop in the Nasdaq. (A couple of weeks ago, it fell more than 5% in a single day, the "ninth largest point loss ever." Clue: The higher any index goes, the bigger the point swings. Losing 5% of 3,500 points is going to involve more points than losing 5% of 1,000 points. Deal with it.)

The Nasdaq fell because it was the first fully computerized index and, as such, attracted a lot of high-tech stocks. Today's day trading fad is to sell volatile tech stocks and move the money into blue chips. So, the fact that high-tech is volatile has made headline news again. Apparently somebody forgot. Hands up, everybody who thinks this is a "historic" event.

The individual stocks I own have been known to rise or fall 20% or more without any specific reason. The Asian economic crisis; European currency fluctuations; the Year 2000 problem; and right now the election is giving the market hives due to the uncertainty of it all. Will we even remember its impact on the market in six months? If not, why are we expected to pay attention right now?

Do I care on a daily basis how much a headhunter would pay me to switch jobs? Do I follow a minute-by-minute ticker of housing prices in my area in case I want to buy a new home? Do today's used car prices make the evening news? If the dollar falls half a percent against the yen, am I going to switch my bank account into yen and try to use yen at McDonald's drive-through window?

All of those things are tracked on a daily basis by professionals who care about them for a living, and yes, they do fluctuate a percent or so each day. But clearly, they're not news. So, why are stock prices reported each day?

Well, I suppose it's easier on the chickens.

-- Oak