ebook essays pieces of the puzzle
Tuesday, August 16th, 2011
the red line

The chart above replicates one from above the fold of the “Money & Investing” section of the Wall Street Journal last Wednesday, updated with the subsequent price action.  The grammatically-incorrect footnote that accompanied it:  “*For stocks are defined as a 20% fall from most recent high.”

Oh, gee, it’s not a bear market — it’s not down 20%.  Wouldn’t it be nice if the WSJ used its prime space to refute that kind of thinking instead of reinforcing it?  Maybe it could take the bold step of admitting that the confusing thing we call the market can’t be boiled down into a simple syrup (or a simple poison), no matter how hard you try.  The paper could extend its review to another famous rule of thumb, the 10% correction — or perhaps we could leave that to the Financial Times.

It’s hard to believe that the leading publications of the day perpetuate such silliness, especially now that there are plenty of tabloid-style finance sites for which it is a stock in trade.  If that red line is crossed, what will it mean?

Precisely nothing, of course, although bystanders who pay attention to those outlets will be convinced that it does and that they should change their behavior in response.  They’d be better served if well-known media outlets tried to educate them, instead of taking the lazy and misleading way out.  (Chart:  Bloomberg terminal.)