Tuesday 9 August 2011


The way the turmoil on the stock markets has been reported, it appears all to be a matter of  a lack of something called ‘confidence’ by people called ‘investors’.  Whatever this ‘confidence’ stuff is, it seems to be pretty elusive.  ‘Investors’ can be full of it one day, and completely devoid of it the next, it would seem.
I’m far from convinced that ‘investors’ is the right description for people and organisations who are buying and selling stocks on the short timescales which are at work here.  Gamblers and speculators seem to be much more accurate terms.  They’re looking to maximise their own short term profits, or at worst minimise their own short term losses; ‘investment’ is surely a more long term activity.
It’s also not made entirely clear in what they have lost their ‘confidence’.  There’s no obvious reason why a company which was worth £x yesterday is suddenly worth a lot less today, nor why its performance is suddenly going to worsen.  I suspect that what these ‘investors’ have really lost their ‘confidence’ in is each other.  They are acting on the basis that someone else might sell before they do, so they’d better get their retaliation in first, or else they’ll lose out.  From then on, the herd instinct takes over.
It’s a dubious strategy over the long term, even in a casino.  But as a way of driving the world’s economy, it’s a lot worse than dubious.
Since this ‘confidence’ seems to be entirely a matter of belief rather than anything tangible, rational, or measurable, perhaps what we need is an all-powerful wizard to issue confidence certificates to anyone who’s feeling a little short of the stuff.  And if it turns out to be no more than a small man with a loud-hailer behind a screen, that doesn’t really matter – once people have their certificates, they’ll be fine.
I’d like to think that this was a tongue-in-cheek suggestion, but I wonder whether it is really very far from the reality of the system which we allow to control us.


Glyndo said...

Sorry John, can't find anything to carp about there.

John Dixon said...

That's OK - carping is not mandatory.