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Column: Pundits Start Econ Blame Game

This story was written by Joshua Rabon, The Daily Gamecock


Thrill-seekers rejoice! You are no longer limited to base-jumping, skydiving, bull riding and Russian roulette - investing in the stock market can provide all the action anyone could want.

Since the Dow closed at 10,850 on Sept. 30, it has dropped to 8,451, bounced to 9,387, fallen to 8,175, spiked to 9,625 and plummeted to 7,552. That may not sound like much excitement but put the downturn in perspective: Energy mogul T. Boone Pickens alone has lost $2 billion since July. Warren Buffet's Berkshire Hathaway is down 43 percent for the year, representing an estimated personal loss many times greater than Pickens.

It took some research just to figure out how to spend that much money. With $2 billion you could buy an Airbus A380 Flying Palace to jet to Hawaii and surf the giant waves of Waimea Bay. After tiring of that, you could purchase a 414-foot personal yacht to scoot over to Asia and scale Mt. Everest. And just in case you still needed an adrenaline fix, you could drive your new Ferrari Enzo over to Pamplona to run with the bulls. No roads? No problem - just construct some. Trust me, you can afford it. Assuming you ate steak everyday, washed it down with Dom Perignon and the entire adventure took a year, you would still have about $1.37 billion for spending money. After a $30 million adjustment for miscellaneous expense, of course.

So maybe the hysteria over the market isn't overblown. All said, the market decline reflects trillions of dollars in lost wealth. What is overblown is the blame game pundits are playing trying to explain the cause of turmoil.

One of the more common explanations is that concern over Barack Obama's economic policy is causing the market to drop. This claim ignores a fundamental market belief: New information is assimilated almost instantaneously. Trading on news won't get you anywhere - as soon as someone like you or I read it on CNN, the market knows. While the efficient market hypothesis is debated, it is only argued to an extent. No one notable rejects the notion that the market is efficient - maybe it just isn't perfectly efficient.

So when the market jumped 300 points on Election Day with an Obama win almost universally predicted (even by Karl Rove), perhaps you could argue the president-elect had something to do with it. Perhaps. But blaming a man who won't be sworn in for weeks for a 2,000-point slide is willful ignorance.

Interestingly however, the pundits are on to something with their haphazard finger pointing. The point they have made is that no one knows what or who is to blame for the financial troubles. And that is terrifying. The fact that Treasury has reversed position on the TARP program is merely a reflection of the newest philosophy of economic fix: Throw stuff at the wall and see what sticks. Eventually we'll hit something that works.

In the meantime, the phantom spooking the market will continue to do so until it can be identified and attacked. At this point, the perpetrator is clearly not Obama, but fear.

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