A Watched Market Doesn't Rise

We humans have a strong fascination with the macabre. That's why we experience traffic jams as people slow down and rubber-neck to observe the details of a car crash or the identity of a speeding ticket recipient. The same thing is increasingly happening with the financial markets. People who wouldn’t recognize a credit default swap, put option, or currency basket if banged on the head with them are nonetheless glued to CNBC, mesmerized by every uptick and downtick of the stock market. I think it's because everything on Wall Street is black and white. It's arithmetic. The market is up or down. If it's up, something good must have happened; and if it's going down, it's just a matter of time before we retest the lows of the last two centuries. And because all the talking heads are shouting breathlessly over each other, it's easy to get caught up in the frenzy.

As your Hard Working Money friend, I urge you to not fall into this trap. Obsessive market fixation is bad for your health, a waste of time, and totally unnecessary. The market is not rational, so you don't need to flinch or rejoice with the market's over-reaction to every bit of positive or negative news. It's pretty much all nonsense. When oil prices go up, it's bad news -- except when it's a sign of a stronger economy in which case it's good news unless, of course, the economy is getting so strong that rising oil prices portend runaway inflation. Same thing with the dollar -- experts will argue that it's over-valued and about to crash while others argue that it is still and will remain the global currency of choice. In truth, very few of the so-called experts you see, read and hear are right more than 50% of the time. They simply appear smarter than the average bear or bull because they opine with absolute conviction (and also because they never own up to their bad calls).

Today's market is just like the stock market of 5 years ago, 10 years ago and 20 years ago. It's a puzzle wrapped in an enigma with a large conundrum thrown into the mix. It's a puzzle that will be solved over time, and no amount of consternation on your part will make it happen any sooner. So take a chill pill, remove the streaming tickers from your desktop, and spend a bit more time with your family and friends. That will pay much bigger dividends than a one-sided love affair with the markets.