And the News Get Worse

​I love the Disney musical “Newsies.” The movie originally didn’t do too well, but in recent years the world has embraced it with the very popular live Broadway versions.
The story centers on a group of mostly orphaned newsboys who hawk daily papers on the streets of New York. The more experienced “Newsies” teach the younger boys that the secret to selling papers is a great headline, even if you have to just make one up because ultimately, “Newsies gotta sell papers.” One of the newer boys is unhappy with the dishonesty and says to the group leader, “My dad taught me not to lie,” to which the more experienced boy responds, “Well my dad taught me not to starve.” The story is set in the 19th century but not much has changed in the news media.
Over Labor Day weekend I decided to spend some time reviewing the financial headlines for the month of August.  Here are some of my favorites: “Dow Plummets,” “Stocks Skid,” “Markets Sharply lower,” “Stocks Crater after Fed Chief Speaks,” “Investors Plow money into Bonds,” and “A Wild month for stocks.” I began wondering if I had missed some major market disaster.
One of my favorite headlines was a picture of a floor trader with his head in his hands and the caption, “Floor trader agonizes as market falls.” Our office got a great laugh out of that one. The guy probably got to bed late and was just wishing his shift would end. I am sure he wasn’t worried about a few points of market movement. But hey! Newsies gotta sell papers!
After reviewing the dismal headlines, I looked at my client accounts and didn’t see anything that even slightly resembled the gloomy picture that was painted. In my conversations with other advisors I didn’t hear of any unusual moves into bonds and we didn’t field any calls all month from panicked investors. I don’t know which “investors” the news people were referring to but they certainly weren’t any that I knew of.
The truth about volatility in the investment markets is that it is normal. In fact, volatility is a necessary part of an efficient market. There has to be push and pull, a give and take, in order for markets to properly adjust. The alternative would be an artificially controlled market, and no one should want that. As the numbers get bigger, ie. DOW 26,000 versus DOW 8,000 just a few years ago, the daily movements will naturally “seem” bigger. On black Monday in 1987 the DOW average fell 508 points or 22%. That would be a nearly 6,000 point drop in today’s numbers. Now that might be something to “agonize” over, and yet we survived it.
So here we are in September and already the gloomy headlines have begun, so hold on to your seats. We could be in for a rough ride. Or perhaps, only those who react emotionally to the dire headlines will be. After all, newsies gotta sell papers.