Barry Ritholtz hits upon a bugbear of mine - the atrocious reporting of daily swings in stock markets. He says: "Pat explanations for the markets’ daily gyrations rarely ring true."
He's right of course. But I'd go further. They are often nonsense - merely a search for a pattern in what is really random data.
For example, today the FT tells us that "strong gains on Wall Street overnight were fuelled by easing oil prices." The Times says" "Wall Street was boosted overnight after the oil price eased and after an upbeat report on consumer confidence."
It sounds plausible. But it runs into a problem. So far this year, the correlation between daily moves in the S&P and oil prices, though negative, has been insignificantly different from zero. The correlation between weekly moves has also been statistically insignificant, but positive. That's what you'd expect in noisy data.
Explaining market moves are just easy after-the-fact rationalizations. In weak macroeconomic conditions, a market fall will trigger the line: "market falls on economic fears." And a rise will invite: "market rises on interest rate hopes." It's the same macroeconomic story.
There are several clues to this pin-the-tail-on-donkey approach. One of the best is "after". It hints at causality without stating it. Why not say: "market rose today after I missed my bus"?
Paradoxically, of all the explanations the dead trees give for market moves, they never offer two of the most likely ones. You never see the stories: "market rises but it's just random noise." Or "market rises because risk aversion declines and, hey, de gustibus non est disputandum."
Market reporting isn't just stupid, though. It is potentially downright pernicious. In offering a spurious reason for every blip in the index, such reports invite us to believe there's a mechanical link between economic conditions and share prices. They therefore encourage naive investors to believe the market is safer than it really is. Worse still, they encourage them to trust the "experts" who seem to understand such links.
The fact is, though, if you want to understand financial markets, you must ignore (almost) everything you read in the dead trees.