“The media select, they interpret, they emotionalize and they create facts.. The media not only reduce reality by lowering information density. They focus reality by accumulating information where “actually” none exists.. A typical stock market report looks like this: Stock X increased because.. Index Y crashed due to.. Prices Z continue to rise after.. Most of these explanations are post-hoc rationalizations.. An artificial logic is created, based on a simplistic understanding of the markets, which implies that there are simple explanations for most price movements; that price movements follow rules which then lead to systematic patterns; and of course that the news disseminated by the media decisively contribute to the emergence of price movements.”
– Thomas Schuster, ‘Meta-Communication and Market Dynamics: Reflexive Interactions of Financial Markets and the Mass Media’.
“Who’s afraid of cheap oil ?” asks ‘The Economist’ on its front page this week. Judging by the last fortnight in the stock market, just about everybody is. Forget supply and demand imbalances in the petrochemical market; there is evidently a huge demand for nonsense, because the financial media and a cavalcade of inane commentators have gone into overdrive in order to supply it. Stocks are off because the oil price has collapsed, we are told.
Here is a “lesson” from history. In October 1973, OPEC initiated an oil embargo in response to US involvement in the Yom Kippur War. Within five months, the oil price quadrupled. By the end of 1974, US stocks had fallen by over 45%. The US got off lightly. UK stocks fell by almost 75% during the same period. Oil up, stocks down. Now the oil price is down sharply, and many stock markets are down sharply. Since they fall when the oil price goes up, and when it goes down, perhaps stock markets will also collapse if the oil price goes sideways. Or if it enters some alternative dimension not wholly perceptible by human consciousness.
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