I think Bloomberg’s Matt Levine makes an astute point in these tweets. (I mean, of course, he doesn’t need that validation from me. But still.)
So let’s start here.
Like the deep-EMH, lol-nothing-matters view of markets has utterly conquered markets journalism.
— Matt Levine (@matt_levine) August 25, 2015
There are no more hipster points for saying you don’t know why markets are down!
— Matt Levine (@matt_levine) August 25, 2015
This is sort of the post-tech, post-housing bubble outlook on the markets: they are random and nobody knows what happens next.
The upshot, however, is that people are sure that others will look stupid predicting the future and also reserve the right to make fun of anybody who does precisely that. Which I think is sort of having your cake and eating it.
This general worldview is sort of the reaction to the efficient-market hypothesis dogma that became so popular during the 1980s and 1990s, and then blew up spectacularly with the collapse of Long Term Capital Management. The idea of efficient markets, or that markets fundamentally work, still persists (I mean, we at Business Insider reference “the market” all the time), but there is a declining lack of conviction about economics moving towards being a precise science on the order of say, physics, than there may have been a generation ago.
Fundamentally, there is no longer a consensus belief that markets will handle things on their own. At least certainly not financial markets.
I think we could sort of go down the rabbit hole with regard to like, why markets in local delis and markets in VIX futures aren’t really the same thing, and in a world dominated by electronic, high-frequency trading, financial markets aren’t really “markets” in the textbook sense, but this is all getting a bit beside the point.
What we’re really dealing with, in the current moment, is an acceptance that there is no (credible) way to explain what is happening in markets.
Except what we know is that things are happening in markets, and as I wrote on Monday, what this amounts to is writing — time and again — about price. Which is really nothing but calling out the play-by-play, which is sort of helpful but also not: it is a statement of fact. Again and again and again.
But this doesn’t make these facts worth anything in and of themselves.
And like, this is where conspiratorial, loosely-innuendoed commentaries about hedge funds liquidating holdings triggering big market sell offs and so forth — the kind of thing that will show up first on Zero Hedge — actually becomes the most material piece of information for investors to grab hold of.
This is what makes sites like that so appealing in the first place: there’s always a reason, even if it keeps coming back to “Russian hackers.”
But so the point that Levine is not exactly critiquing but definitely quibbling with in the Fusion story linked to in the first tweet (and here) is that there are no more “cute” angles on markets stories.
Everything as it currently stands is basically an admission that no one knows what stocks are doing, and efforts to the contrary are usually met with scorn (particularly by the Finance Twitter masses, which like whatever).
(The additional point is that Fusion’s post isn’t re-drafting headlines “as if they were honest.” These are just cutely packaged visions of what Kevin Roose thinks honest headlines are. For whatever that’s worth.)
And so by writing headlines that are bland and intentionally saying “I don’t know,” you’re basically just covering your own tracks, making sure you don’t draw equivalencies that are too false, and keeping things more or less down the middle.
Of course, writing about the stock market during turbulent times like the last week is a more serious endeavour than I think most markets reporters and editors realise. 99% of your days in this role, writing these stories, are spent sort of re-capping the day’s big earnings, economic data, and giving a glossy overview of what happened in the markets that day.
Which was, realistically, probably not much. And as a result, these stories are only so widely read.
But right now, a lot of people are reading these stories.
And these folks might be nervous. These folks might be looking to sell their stocks, or might even decide to sell their stocks because of one of these articles.
This is not to be taken lightly.
But if the last decade or so of financial commentary has really been about cutting down the BS, then we’re certainly at a point where the admission of not knowing is amount to some other, mutliated form of BS. If the post-EMH era has been about cutting down the value of year-end price targets, of exposing the idea that a headline on a slow Tuesday in April that reads, “Stocks Gyrate On Fears Over Global Growth” is probably just something someone very nearly made up, then a bastardized version of the same is happening in the other direction.
I mean if you crack open the sort of Holy Grail of “Boy, markets are really stupid” — Robert Shiller’s “Irrational Exuberance” — you’ll fine a whole chapter devoted to the media.
And if you’re in financial media, you’ve probably read Shiller’s book and gotten defensive, felt that you don’t want to be remembered in the next book about the next crash as the idiot that kept running the same type of headline over and over again.
“The media often seem to thrive on superlatives,” Shiller writes, “and we, their audience, are confused as to whether the price increases we have recently seen in the stock market are all that unusual.”
“This record overload — the impression that new and significant records are constantly being set — only adds to the confusion people have about the economy. It makes it hard f0r people to recognise when something truly and importantly new really is happening. It also, with its deluge of different indicators, encourages an avoidance of individual assessment of quantitative data — a preference for seeing the data interpreted for us by celebrity sources.”
Not a great view of the media, however true it might be. (It is very true. And the rest of the chapter is no less charitable: the above excerpt is sort of just a dart thrown at the thing for an example of what Shiller says.)
And so again, keep in mind that many members of the media have read this book — or others like “A Random Walk Down Wall Street,” for example — and are either consciously (or unconsciously) responding to this accumulated knowledge, the awareness that people (namely, you, the media member) will be panned for explaining market moves in ways that only sort of only maybe exist for a moment.
What you end up with, then, in the end, is what Levine refers to as the chase for “hipster points for saying you don’t know why markets are down.”
Which doesn’t help anyone.
And so it seems to me that we’ve reached a sort of tipping point, not that I’m sure what is to be done from here. You wouldn’t want to go around attributing market moves to things that aren’t really happening. But at the same time the essentially context-less read-offs of where a number of financial assets are currently priced isn’t the answer.
This is just a thing that is happening right now.