Personal Opinion and Financial Decisions

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Fundamentally, all market activity is in one way or another a response to the interaction of personal opinions. Someone wants to buy, someone wants to sell, and thereby a market is made. The decision to either purchase or sell represents a judgment of the state of a business, how the market is reacting to trends, and how certain stocks will fare.

The motivations of buyers and sellers are not well enough understood for any very precise theory to be constructed around them. All of them concerned with the hard information that presumably influences investors with some recognition of the emotionalism that is also involved.

Much of it is highly sophisticated these days; it has been a long time since the blind panic of the dreadful days that heralded the crash and the depression; but it is emotion nevertheless. As recently as September 1955, when the market plummeted nearly 32 points for a loss of $14 billion in values on the news of President Eisenhower's heart attack, we had dramatic evidence that the market does not have absolute control of its nerves. And, by contrast, in December 1957, the market recovered in a few hours the losses occasioned by momentary alarm over the President's cerebral occlusion. There are, of course, many practical and credible explanations for both responses: the first occurred as an election year approached, Ike's symbolic importance was still immense, the business philosophy he represented was in jeopardy, the second occurred at a point when the fact of an ill president had already been discounted, Ike's political significance, as a president who could not succeed himself, was on the wane. Etc.

Undeniably, however, all of these arguments were based on guesses as to the shape of the future, given one set of circumstances or another. And it is the unknowability of the future that inevitably injects emotion into stock market transactions. Pondering the past and scrutinizing the present, investors — professional and nonprofessional alike — seek signs and portents which will predict the impact of tomorrow on their fortunes.

Since the future is largely a blank map, investors must do the best they can with whatever current information they can acquire to carry them to the frontier of tomorrow. Much of it — make no mistake — is extremely useful. But it must also be said that in the absence of surefire criteria, the investment world examines every scrap of possibly relevant information for clues.

The result is that the new investor, eager to acquaint himself with business and financial news, soon finds that his problem is not obtaining information, but digging himself out from under — and discovering how to evaluate — the flood of facts and statistics that inundates him.

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