Surprise! Oil prices are rising; Housing stock is in a slump

It never ceases to amaze me how volatility plays out in the markets – how easily people forget one day only to rediscover the next. One has to believe that the market movers are all senile – that they can hold an idea in their heads at most for a day, forget it entirely the next, and then embrace it as new two days later. I am convinced that everyone buying and selling stocks these days suffers from some form of Alzheimer’s disease. The symptoms are clinically the same in the market and in the nursing home.

In fact, senile people not only have very real problems with short-term and long-term memory, they also, invariably, are gripped with fear when confronting something “new.” The classical dual behaviors of forgetfulness and panic are almost always the signposts of those with sever memory loss.

Anyone watching market movements across days and watching reactions to news about matters well known – such as the rising costs of oil; the slump in housing sales; the monumental blunders associated with sub-prime loans; etc. -- has to believe that we are living in a world of impaired people. It is fantastic to watch, time and time again, the level of surprise demonstrated by those pushing the buy and sell buttons (and surely the programmers of the machines doing the same) and the talking heads in the media to issues, however important, that we have all known and known fully for a very long time. And, that very surprise takes the market on huge swings, mostly down, every time.

Where are those with memory? Surely someone must know that a Merrill Lynch taking a big write off is not a surprise or data on slumping housing stock are absolutely in keeping with what we all know to be the case. Then why is it that the majority (those empty headed and memory-impaired people) are allowed to reign? Why must all bad news be embraced as new news and then take us all for silly and dramatic swings?

I for one would like to pair a psychiatrist with each market mover for a year in the hope that we might bring more rationality to the markets and see far less volatility.