Wednesday, May 12, 2010

Thermometers and screeching monkeys

By Dan Danford
Family Investment Center

What if you had biological monitors hooked to you all day long? Some gadget that tracked your temperature, blood pressure, heart rate, respiration, and perspiration on a continual basis? All day long, every day.

On some level, that might be good. Especially if there were a moment or moments when intervention could improve your health or life. Perhaps you could cut your workout a bit short to avoid injury, or munch a granola bar when your glucose level dips. Maybe you’d carefully avoid that annoying guy from accounting that raises your blood pressure and gives you a tension headache.

Still, I suspect there’s a downside, as well. Most medical measures are stated in normal ranges because they fluctuate during the day. Our blood pressure and pulse respond to things we think and do. Within a healthy range, there’s nothing to be alarmed about when it jumps ten or fifteen percent. In fact, most people endure a fairly broad range each week.

Minute-by-minute reporting could add a dangerous layer of drama. I say dangerous because it might influence behavior in bad ways. Maybe we don’t really need an extra granola bar every afternoon, or we might stop exercising completely when our heart rate jumps! If emotions create a physiological response, maybe we avoid all emotional situations – even good ones.

Add another piece to this hypothetical puzzle. An expert – a genuine, honest-to-God, doctor, nurse, or hospital administrator – maintains a constant voice diatribe about your vital signs. Calm and reasoned when they look good, but urgent or even frantic when they reach either end of the normal range. Maybe the Surgeon General of the United States, herself, commands the microphone now and then. Constant, relentless, detailed, and (screamingly) boring details about every facet of your numerical footprint.

Ridiculous? I think so. You probably do, too. Why, then, do you watch CNBC every day or load a market app on your iPhone? Why listen to Jim Cramer’s theatrics every evening? Does anyone need market statistics minute-by-minute or hour-by-hour? What purpose do these things serve?

You’re going to say that some of it is entertaining, and I get that. Investing is a hobby for some folks, and I understand that, too. But I worry that there’s a downside to all this market drama. And the downside is, well, drama.

It’s popular among economists and investment professionals to discuss “volatility” in the marketplace. Stocks have always been volatile, but the past several years seem more volatile than most. It just feels like the ride from point A to point B includes steeper peaks and valleys than before. I don’t doubt that this is true.

My guess is that these two themes – constant monitoring and market volatility – are related. My guess is that talking heads stir the volatility by stirring the drama. My guess is that Cramer and Orman and Ramsey and (even) Bernanke open the market floodgates whenever they open their authoritative mouths.

We’ve always had fluctuating markets, and we’ve always had recessions, and we’ve always had political pressures to regulate brokers and markets. None of that is new. What is new is the constant, relentless, detailed, and (screamingly) boring details about every facet of the stock market’s numerical footprint.

Spare me the drama. There’s a well-known adage about not seeing the “forest for the trees.” Really. Too much attention to anything creates more potential harm than good. Let’s all take a step back and enjoy the forest. Put down the microscopes and shut off the screeching monkeys. Breathe.

It’s going to be all right.

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