|
Volume CXXXII, Number 19 |
 |
Misguided hopes
TIMOTHY J. RIEMER
COLUMNIST
Before the war began I wrote a couples articles on how the economy was being weighed down by the possibility and that the end of a conflict with Iraq would be a great weight lifted off of the shoulders of the U.S. economy. Many investors seem to follow this train of thought as they every move they make is based upon the ups and downs that of the war which twenty-four hours a day media coverage has brought us.
This is a problem to voice concern over because investors seems to be making decisions based on the war with Iraq instead of changes in the fundamentals of a company. Granted these are things that are not completely discrete, but the swings in the markets seem to follow even the smallest bit of news on the war. I could understand major movements in markets based on major events in the war, but the events that have a lesser significance on the outcome of the war should not because they do not have an effect on the fundamentals of any company.
People have argued that embedding reporters in the front lines could be dangerous to their lives and the lives of military personnel. The aspect of this unprecedented use of reporters and the constant media coverage that people have failed to consider is that it is having a profound, and I believe, negative effect on the economy.
Even more troubling than the investors making their decisions based on the news of the war in Iraq, is that at the same time they are failing to follow major changes in the economy that actually lead to fundamental changes in a firm's performance. This week manufacturing was given another major blow as one of its major indicators, factory orders, dropped another 1.5 percent. In addition to this the manufacturing index fell to 46.2 leaving it only 1.2 points above 45, a magic number indicating a recession. On Wednesday, when this extremely negative information on the economy was made possible, the Dow Jones Industrial Average rose 2.7 percent and the Nasdaq rose 3.6 percent
I believe that investors are putting too much hope in the war, or the end of the war to solve the economy's problems. At the same time, these same investors seem to be ignoring the fact that not only is the economy stalling, but it seems to be crashing. In my personal opinion Wall Street needs to turn off the television and get back to the fundamentals.
|
FastCounter by bCentral |