It seemed as if the world's stock markets might have finally turned a corner early this week, in response to concerted action from the world's governments. Now things seem somewhat less certain. Since I last posted, people throughout the world have endured bout after bout of bad financial and economic news, with stock markets declining in a dramatic and fearful way. This has combined with continued anxiety about the health of banks and other financial institutions world-wide. People are understandably concerned about the health of the economy and about their economic futures.
The fear is real. To recognize that the situation is fearful is not the same thing as giving way to panic, as I tried to suggest in my last post. Nonetheless, an attitude of smug complacency would be completely inappropriate when we are faced with economic convulsions of this magnitude which will surely directly impact all of us.
© Schoolgirl| Dreamstime.com
It might be a surprising way to think of it, but nonetheless the markets pose psychological questions to us. They ask us what the value is of a given share, of a commodity, of a "put", of a "call". There is a rational thinking element to the process of how something is to be valued in the market, based on all manner of fundamentals: market conditions, price-to-earning ratios, and the whole endless array of techniques and information that modern finance can bring to bear. But ultimately, the value of an investment will come down to a subjective, feeling-based factor. How much of my money -- my energy, my sweat, my care -- do I think this given investment is worth? In the end, there will be a difference of valuation: the seller and the buyer will always disagree on the outlook for a given investment, and what it is fundamentally worth.
That is the nature of markets. Each market is an enormously complex expression of individual and collective psychology, full of fateful outcomes for economic life on the large scale, and on the very small, even individual scale. The valuations that the market places on things are continually shifting, ephemeral. Oil is a conquering giant this week, and is a defeated midget the next. Nothing is permanent, nothing is lasting, nothing is sure, as much as we would like it to be.
On Wall Street, there is a famous statue. It is of "the Bull" and "the Bear" of bull and bear market fame, locked in what seems like eternal struggle. However, in my opinion, the sculpture doesn't get the struggle between Bull and Bear quite right, for in the Wall Street version, it seems that the Bull has gotten the Bear down on the floor, almost as if he were about to finish him off. But of course, the Bull never does finish off the Bear. They remain locked in an eternal conflict, first one ascendant, then the other. And all of us are along for the ride.
© Enrique Sallent| Dreamstime.com
If that is the human condition, then we can all expect our economic fortunes to be in continual flux. If my identity then is tied up with my wealth or my occupation, how can I find anything secure to found my life upon?
