Reading Alan Abelson's rantings and ravings about how the market is bonkers etc..., it occurred to me that he (among many others) is falling prey to a very common fallacy: he is confusing the stock market with the economy, the same way others are confusing a stock with the underlying company. He is in his role saying there is a disconnect between the level or the direction of the stock market and his appraisal of the current state of the economy if it's his opinion. But he is totally missing the point when he derives from that opinion that the stock market is wrong.
The stock market is never right or wrong, it just is. Sometimes it discounts things, sometimes it's late factoring things in and sometimes it's adjusting right along the perceived economic realities. Add to that the fact that those perceived economic realities turn out to be wrong most of the time and you have a situation where judging the market's sanity by comparing it to where we think the economy is heading is pure madness. And doing it every week on the first page of Barron's, week in week out is bonkers.
Having said that, I very much appreciate Abelson's wit, style, cynicism and refreshingly outside the box thinking.
4 comments:
Well stated. Regarding the recent Barron's, any musings on Chinese solar companies?
I heard they're experiencing quite the solar flare. I haven't been following them but I'll make sure to take out my solar filter and take a look.
Abelson is a good writer, but does tend to sound a bit doddering when he goes on about that disconnect you're referring to, sort of out of touch. But he'd make a terrific sportscaster if he can talk anything like how he writes.
You're right, he's got that dramatic quality.
One good thing about him is that he's a welcome counterweight to the uberbulls at CNBC et al.
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