Tuesday, January 1, 2008

Arbitrary Boundaries of Time

Associated Press Writer Malden Read seems to have joined most of the financial reporters by dwelling on the "somber mood" with which Wall Street ended 2007. Needless to say, there is nothing particularly magic about December 31, 2007. Yes, the Dow fell 101 points yesterday; but Malden's phrase, "the latest in a string of triple-digit moves," omits the fact that those "moves" have been in both directions! Similarly, Malden attributes the "respectable increase of 6.43 percent" over the entire year to "a big first-half advance," thereby implying that the second half of the year has been one big catastrophe. However, if we look at a five-year plot that occupies the same horizontal extent as a one-year summary (which we can do with the Yahoo! Finance Charts display), we see a smoothing of the data that indicates a slowing of growth around the middle of the year but hardly a reversal of the trend.

The lesson here is that financial reporting thrives on the same fear factor that drives any other form of news reporting. We are conditioned to believe that every day on the Dow is a matter of the life and death of our portfolio. However, as I have discovered, it is not that hard to come up with a properly balanced portfolio that can ride through the eccentricities of just about any given day. This gives us the liberty to think in longer terms than the ones dished out to us. We can look over longer windows to get some sense of the "smoother" behavior of trends and the factors that might change them. Unfortunately, this kind of thinking is not sensational enough to land a spot on the evening news; so our thoughts about well being based on our portfolio get jerked around the same way as our thoughts about terrorist threats. None of this benefits what Isaiah Berlin has called our "sense of reality;" but that sense of reality does not sell advertising slots on television. Indeed, most of the advertising has been designed to subvert our sense of reality by creating desires for things we neither need nor particularly want. So it is that we all become victims of what Max Weber called the "loss of meaning," as well as the mechanisms through which the loss of meaning carries along the "loss of freedom" in its wake.

No comments: