Josh Stern

Week in Review, Part I: Global Economics, International and U.S. Equity Markets Overview

I think there is a good point buried somewhere underneath Mr. Cara's embarrassing whine: if we look back in history, equities have, in the long term, been a positive sum game, and no doubt part of that is that the U.S. public and govt. have gotten sold on the idea that the equity markets make a positive contribution to the U.S. economic system by helping to allocate capital efficiently; but if the U.S. public and govt. becomes convinced that the signal to noise ratio of economic fundamentals to market movement is exceptionally low, they will stop supporting this enterprise and result will be both that the market is less of a positive sum game, that it has less liquidty, and that there is lower social status and fewer economic rewards for market participants. So it' reasonable to believe that there is a potential "tragedy of the commons" problem connected with the phenomena that almost everyone comes to believe that assessing fundamental valuations is irrelevant to trying to make money in the markets.