Wall Street headless chickens

Ed the Editor's personal blog corner

Considering the sophistication of the technology at their disposal and the supposed perfection of the free market in which they operate, why do I get the impression that the traders on Wall Street are like headless chickens?

If the wind blows 2mph slower than expected on Tuesday, by Wednesday the traders sell sell sell their stocks in windmills and stack up on oil - and then complain that demand for oil is raising prices and stunting growth.

If Bernanke says inflation is fine, suddenly those blue chip companies that weighed down the whole economy and couldn't change with the times, even if you paid them, are suddenly the engine for growth in the stock market.

When the DJI reaches 14000, it is like party time and the bulls gird themselves for DJI 15000 parties, while bears growl and downgrade their estimates to below 13000.

In one day, steel goes from sexy to over-priced. Suddenly it doesn't matter what the big guns on Friday were saying about unlimited demand for steel by the Chinese and Indians and Eastern Europeans. On Monday, the retail sales figures are out and nobody is going shopping any more for sneakers, so best get out of steel before the down cycle kicks in again. Uh?

It would be quite funny, if it weren't for the fact that these traders, investors and financial gurus are playing numbers, and almost never worry about the human aspect of their actions. They glibly talk about bad debt subprime mortgages ONLY putting 7% of the country out on the streets, so let's get into Aluminium which ONLY leaves hundreds of thousands of acres of our planet barren.

Apparently even China has a conscience and 10% of their fuel consumption has to be enviro friendly by 2012. Some of the burnt-out Wall Street wrecks high on options are human and say that solar power companies in China are "green" and also represent a good bet for investors. So, one side of the Wall Street floor rushes to sell corn futures (the corn used for methanol not tortillas and bread) and invest in solar stocks before they become expensive. Meanwhile, the other half, so up to their ears in Chinese fossil fuels that they can't breathe without an oxygen mask, sell their speculative holdings in solar. They think they are logical, because once it gets to winter in 4 months' time, there won't be so much sun, which means less solar power and the demand for oil and coal will be up.

The trouble is, half those traders don't even know which months winter falls in China. They assume it is the same as ours, and assume it will be rainy and cloudy. But when they look up in Wikipedia and learn that the sun always shines in China, because they have a machine to blow away rain clouds, the headless syndrome kicks back in, they tap a few numbers into their tablets and shoot off again in a different direction.

I would like to believe that at the end of the day, everyone won as a result of the headless chicken syndrome. But somehow, I don't subscribe to the point of view that if you run around in enough circles, you see the light. That is why I wouldn't recommend watching too much CNBC Business news, and I would recommend any would-be investors read The Motley Fool at leisure. At least the Fools aren't headless, and they are honest enough to say that if you are a chicken when it comes to risk, stick your money and your head in a safe place and look forward to your retirement in a mud hut seniors complex in Guatemala.