Monday, June 13, 2011
Destruction of Confidence
If stock markets are a barometer of confidence, then the world is in for months more of economic pain. On the other hand, market makers, for all of their models and math, are uncertain when it comes to predicting the future. They don't know anymore than anyone else. So, why are the markets given so much credibility? Because there isn't anything to replace them in terms of reflecting the mood of the moment. They are good indicators of the present. Unfortunately, when it comes to investing, one is less interested in the present than in what is to come. This presents a dilemma with every tick of trading that has no alternative but hope -- hope that a stock will rise if one is long and will fall if one is short. So, national confidence at the moment is sour. By the end of the week or the month, it might return to a more normal level, but then again, it might not. The markets have no way of telling us.
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