Nervous fingers on financial triggers

While many in Saipan are just rolling off of a relaxing three-day weekend, the long stretch of stock market inactivity was a nail-biter for stock investors.

If you follow such things, you’ll know that Wall Street stepped on a financial banana peel on Friday. Most major indices slipped about three percent. Which is, in a sense, sort of cool, given that I raised the red flag about it just a few days prior in a column (“Excuse me sir, your yield curve in showing.”)

But my gloating little smirk on that front can’t cover for the angst that shareholders suffered over the weekend. They had a three day weekend to wait and wonder and worry if Tuesday’s market opening would bring a continued plunge.

As pent-up weekend worries threaten to accelerate the market sell-off, this column is going to press. Who knows what will happen when the spooked market opens for business on Tuesday (New York time)? I sure don’t know,] but I do know that there are a lot of nervous fingers tugging on light triggers. When the financial gunslingers face off for a showdown, it might be worse than high noon at the O.K. corral.

But whatever happens on Tuesday, the three-day worryfest that rippled through middle America proved that Wall Street and Main Street have become the same financial highway. Stock ownership used to be the exclusive circle of the moneyed elite. But now it’s the realm of the Homer Simpson crowd, too, which participates via the painless process of retirement plan contributions. The hoi polloi is talking Price to Earnings ratios just as] often as the boardroom boyz are.

Which is all well and good when the market is happy and the cost of not understanding what’s going on is masked by the overall gains. If things turn sour, though, raw emotion is going to rule the day, and Mr. and Mrs. Main Street, who have come to believe that capital gains are an entitlement, are going to be dismayed.

Indeed, with the broadened base of stock ownership, we have to contend with a larger element of mob psychology in the market. Wall Street worry-warts point to this fact, and are perpetually keeping their ears to the ground for signs of a potential stampede of retreating investors. That’s why mutual fund contributions are so closely tracked–they reflect what your average working stiff is shoveling into the equity markets.

Such a stampede, to my mind, will merely be the result of a stampede itself. Financial and economic fundamentals won’t trigger it; it will trigger itself, when a minor ripple strikes the common psyche at the right trajectory, then all hell breaks loose. Is this a likely scenario? Yes, it is, but the question is WHEN, and the answer is NOBODY KNOWS.

Nowadays, Geraldo probably holds more sway over the stock market than Warren Buffet does. I’ll concede that I probably understand the market even less than I understand Geraldo. I’m no stock picker. But I’m not blind either, though, and I see forces afoot that might make this year look a lot different than last.