Posted tagged ‘size’

Dear Financial Media: Please Rise Above the Least Common Denominator

March 11, 2008

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?

(I’ll completely skip the fact that it’s often the Dow Jones Industrial Average that’s cited and the issues associated with that index!)

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