Dear Financial Media: Please Rise Above the Least Common Denominator
It’s a simple request. Here’s an example, when a T.V. network talks about Wall St. being happy or sad, “the market” being up or down some percentage, etc. based on what “stocks” do. The S&P 500 represents about $13 trillion (slightly lower, as of this posting). The bond market, though, is over $27 trillion dollars (a statistic from 2006). Now, while the stock and pure interest rates sometimes move in correlated directions, the credit markets or mortgage market can be experiencing a very different directional movement. As recent history has shown us, fixed income markets can be more important to consumers and the economy over a period of days, months, or even longer. So, then, why don’t media organizations describe the financial world based on how fixed income instruments perform? Oh, and lest I forget the $516 trillion notional of outstanding derivatives contracts ($11 trillion in net amount, but counterparty risk makes both numbers valuable) that have been pushing around the larger bond markets recently (ABX, the storied sub-prime index, is a member of the derivatives segment). I realize that these nuances and different markets aren’t easy to explain, but why should that stop the financial media from explaining it?