The slide, or slump, or fall-sorry, correction -was amazing but not surprising.
There is a predictable cycle to disaster stories, whether natural, military, social or economic. First, the story breaks like a dam. Details flood in: the hushed accounting of damage, the tales of panic, the furrowing brows of the male announcers, the smiles of the females, the stiff upper lips of the injured, the pep talks by the authorities. TV glitters with shots of floodwaters rising, exurban homes blazing, Iraqi troops marching into Kuwait City, brokers holding phones to each ear and yelling. Villains are nominated: hurricanes with human names, accumulations of dry brush, El Niño, corrupt Asian profiteers (“the Asian flu”), currency speculators. Heroes show up: the good Samaritan, the plucky small investor. Language inflates: thus “blood bath” and “panic” on a bad day, “dead cat bounce” as a hedge during a good one, with almost audible reluctance to volunteer the dirty little word “crash.” A little good news goes a long way, as on CNBC early in the morning of Oct. 28, when correspondent Maria Bartiromo announced, with underscoring and verbal italics, that Abby Cohen, managing director of Goldman, Sachs & Company, had sent out a buy signal; and if her intense manner were not enough, Ms. Bartiromo made it a point to verbalize that she thought it important to get that particular piece of news out and about.
Bring on the experts, spinning and counterspinning in crisp suits and crisper tones. Professor X saw the catastrophe looming all along-low rainfall, heavy rainfall, high profits-to-earnings ratios. Analyst Y says it’s tight, fundamentals are strong. Theorists of Wall Street’s unsurprising October Surprise wait in the wings. All the professional knowers must now crank up clear ideas of just what is happening, which may or may not be clear in their own minds and may or may not be what they thought the day or the month before. If analyst Y clashes with analyst Z, well, if the experts disagree, it just goes to show that fate is out of your hands; you pays your money and you takes your choice. If analysts aren’t willing to go on the air with instant and knowing interpretations, they may not get the call next time. Rarely are they asked what they are doing with their own money, just as seismologists are not asked, If you’re so smart, why don’t you live in Texas rather than San Francisco? And even after Oct. 19, 1987, when some business reporters did begin to pay sporadic attention to their favorite analysts’ track records, there are still plenty who don’t. The main thing is to sound crisp and authoritative, because if Y doesn’t, other eligible heads will talk as though they know what they’re talking about, and at the next breaking news, the whirling Rolodexes will spin past Y to Z.
In the nature of things, the story advances. As Herbert J. Gans pointed out years ago, all disaster stories culminate in the restoration of order. In the aftermath of the riot, the brooms come out. After the bomb, the earthquake and the freeway collapse, rubble is cleared and repairs begin. Floodwaters recede, bodies are buried. Calls to get to the root causes alternate with calls to punish perpetrators, but always there are declarations of the will to rebuild. Humans are resilient, are we not? American buoyancy comes to the fore, though not without tributes to destiny. Computers are programmed to print, with a single keystroke, the name Santayana and the reminder that those who fail to learn from the past, etc. (One thing that ought to be learned from the past is that a lot of the folks who botched the last round thought they were learning from the past.) Sewing supply shops sell out of blue ribbons as commissions are appointed. Eventually there are rallies of human spirit and of share prices built upon the belief-for which there is always some reason-that the system worked. The system worked and will go on working, that is, until the day that it stops working.
Who knows how many more hills and dales the roller coaster of legalized gambling, a.k.a. stock trading, will plunge through by the time this column appears seven trading days hence? (The Dow moved more than 300 points between the time I started writing this column and this point.) We hope forwards and know backwards. Positive knowledge emerges from autopsies. Geniuses are crowned too late to benefit losers. So let me put my point in such a way as to weather all manner of market vicissitudes in the days to come. Steep rises and falls in human fortune tell us a great deal about the human condition that rational calculation is supposed to have tamed. Capitalists are supposed to be sober types with the souls of machines, but moments of panic and giddiness tell different tales. Investing is gambling, odds of unique events are incalculable, chance is ineradicable, and while gamblers have systems, and good gamblers usually know when not to bet the ranch, usually isn’t always. While lawyerly boilerplate denies that past results will determine future results, the stock market day in and day out promises to reward rational exuberance. Without quite committing a promise, it promises happy endings alike to those who are sitting on top of discretionary piles and to those who’ve risked their pension funds. The market is a combination crapshoot and Ponzi scheme, a wild denial of fate, a chorus of faith, uplift made palpable. This World Series, the global market that never closes, with derivatives bursting in air, expresses the romance of capitalism, where calculation weds the wildest of wishes, and big money takes little money up for the ride. A one-day 500-point correction might just be the comic element-up till the moment when it proves tragic.
And it is into this sum of passions and schemes, this triumph (as I submit this column to the printers, with today’s Dow boom now over 400 points)-this triumph, as I was saying, of wish over experience, that today’s buccaneers want to direct a goodly portion of the nation’s retirement savings. Good luck.