Explaining randomness
Once again, let me stress that I did not make this up:
The point, you may ask? Yes, the point. Explaining what is essentially a random phenomenon: the everyday up and down motion of the stock market.
On any given day, all else being equal, the stock market exhibits what is known as a random walk. There are so many people interacting in the market, and they have so many different motivations and points of view, that the cumulative effect is random.
There are obvious exceptions. When the markets re-opened after the September 11 attacks, you could explain the downward movement pretty easily (people are freaked out and selling like crazy). But then you get hooked on "knowing" what caused the market to move the way it did that day, and then you want to explain market movements every day. Once the market went back up, or at least didn't lose much one day, people were "bargain hunting". If the market goes up for a while and then dips, people are "profit taking".
Which is great, except that more often than not there aren't news items that would impact market movement, so you're left explaining randomness.
My advice: stop it. I realize all the people on the news need something to say, but once you guys start blatantly contradicting yourselves likes this, maybe it's time to pull back the reins a bit.
This randomness also underlines why it's so important to be a long term investor. I don't have time to worry day to day about what the goddamn Nikkei average is doing, or whether the European central bank cut interest rates. I just want to know that in 50 years, when I die at work (because retirement is for wusses), my hot ass trophy wife will have something to live off of before she marries an orthodontist.
Apologies in advance to Mrs. Bart, as I don't think she was aware of my octogenarian trophy wife plan. To be fair it only recently came together. Just consider this a reminder to my contemporaries to lock up their granddaughters in about 45 years.
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