business2.com
Financial data reported by mainstream media were once mercifully simple and
brief. Reporters might tell us that interest rates had risen a quarter of a point, or
that the unemployment rate had dropped a tenth of a point, or that the dollar
had risen slightly against the German mark. But now, even on general news
segments, we are bombarded with details once considered too technical even
for seasoned financial industry professionals.
I watched recently as one of television's talking heads reported that although the
monthly trade deficit had dropped, the movement should not be interpreted as a
positive sign. Why? Because export figures contained a large commercial
aircraft shipment that markets had known about for months in advance.
Another correspondent told me that the rise in the wholesale price index should
be discounted heavily, because 34 percent of it was attributable to movements
in traditionally volatile energy components of the index.
Online, the data-dump only deepens. Go to any other major financial services
site and you're hit with market minutiae that few people could possibly have
command of: every market index from "real-time analysts" and every public
filing issued by the Securities and Exchange Commission.
We have the Internet to thank for the fact that all
of that information is now available 24 hours a
day. But how much of it is actionable? Do
ordinary citizens really need to know about this
stuff? When we learn that durable goods
inventories were expected to rise 2.2 percent but
actually rose only 2.1 percent, what, exactly, are
we supposed to do? Since it's hard to imagine
how such information might help us with the
day-to-day decisions we confront as consumers,
why are the major media outlets bombarding us with so much detail?
The obvious answer is that a growing number of us are no longer merely
consumers. Almost half of American households now invest in the stock
market, up from only 25 percent in 1983, and millions of us actively trade
shares over the Internet.
In the process, many of us have reaped astonishingly large windfalls. Someone
who bought $10,000 worth of Amazon.com stock just three years ago now
owns shares worth almost $1 million. Some investors I know seem content to
trust their hunches and luck, but most seem to be hunting for an edge. Some
read biography, trying to fathom the talents and motivation of corporate
leaders. Others study emerging technologies. Many even try out products
firsthand before buying stock in the companies that make them.
Millions of other investors, however, find such strategies hopelessly subjective.
And in a country that has long been obsessed by baseball statistics, it is little
wonder that these investors seek guidance from cold, hard numbers. Batting
averages and price-earnings ratios have a clean, objective quality. That they can
be compared to the fourth decimal point if necessary lends them a veneer of
precision that many find irresistible. |
