OLD Media Moves

The problem with stock market coverage

September 15, 2007

Posted by Chris Roush

TheStreet.com’s Marek Fuchs writes Saturday about how the business media tends to make big conclusions about why the stock market is moving every day even though the moves aren’t that big.

Marek FuchsFuchs wrote, “We’ve been through this before, but it bears repeating. The business media, unlike the world at large, operates under the assumption that when there is a what there must always be a why.

“But I want to take a step back this weekend to point out to you the main difference between a summary of market action that’ll inform you a bit about what went on that day and one that runs the risk of leading you down the wrong path. The difference, in the end, is between thinking big thoughts and small.

“Normally, in life, it pays to think big and draw inferences, conclusions and then extrapolate. But daily movements of the market can be so meaningless or so tethered to fleeting events that you are better off gravitating toward the small. When it comes to a daily stock market move, even the what (say a 100 point move on a 13,000 base) can be so proportionally tiny as to basically be imperceptible.

“Is there a why? Well, probably, but it’s likely small too. So as you go on, savvy investor, forget the watermelon-sized conclusions that come from daily stock market moves. Leave extrapolation to the, uh, extrapolators.”

Read more here.

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