Here's an old story that most of us have heard when we were children. A group of blind men want to know what an elephant is like and are taken to an elephant to figure its shape out for themselves. Each one touches a different part and thus gets a completely different idea of what the elephant is like. One touches its side and thinks the elephant is like a wall. Another one touches the trunk and thinks it to be like a snake. The one who touches the tail thinks that the elephant to be like a rope and the ears were like a fan and the tusks like spears and the legs like tree trunks and so on and so forth. The moral of the story is obvious. In some versions of this story the blind men become violent over their differences and beat each other up. The story is used to indicate that reality may be viewed differently depending upon one's perspective. The problem, of course, is not the blind men are all wrong but they are all correct, but only partially so.
During the last week, the stock markets have fallen sharply, losing about 5 per cent over five trading days. Right now, in newspapers and on TV channels, there are any number of blind men offering opinions about the elephant in the stock markets. Here are some of the more popular reasons. Worried about inflation and under pressure from the Left, the government will reduce duties on X and/or forbid the exports of Y and/or ban futures trading in Z and/or increase capital gains tax (either short-term or long-term) and/or an increase in the Securities Trading Tax and lots more. All of it sounds like reasonable fears and any one could come true. In recent months, generally when I talked to big investors they seemed to be hunting for reasons to justify the rise in stocks. Now, they are desperately hunting for reasons to prove that stocks are going to fall. At the end of the day, the fact remains that after years of booming stock prices, everyone is nervous and knows that there will some kind of a correction and would like it be over and done with as quickly as possible.
Actually, the situation is a little worse than it was in the fable. There, the blind men kept their opinion within themselves and argued with each other and maybe broke each others' heads. But these blind men, the ones we are listening to now, are shouting at the top of their voices and there are multitudes who believe that the blind men can actually see the whole elephant. The real problem is that there is now a huge army of pundits who are professionally committed to explaining each hiccup in the markets by touching whatever part of the elephant they feel they are experts in.
One version of this story I found on the net has a twist. A clever man comes along when the blind are fighting and says that the elephant is a great tree, and on this tree grow leaves like great fans to give most wondrous shade and fan the breeze. And the branches of this tree are like spears to protect it. For this is the Tree of Creation and of Eternal Life, and the Great Serpent hangs still upon it. Unfortunately, it is hidden behind a great Wall, which is why it was not discovered until this very day. It cannot be reached by normal means. The expert then charges the blind for telling them what the elephant is really like and makes a neat bundle of money. The moral of the story is that anyone can describe an elephant to blind men but only some can make money out of it.
As for me, as a professional, full-time, card-carrying member of the tribe of blind elephant experts, I've resolved to not even try to find the elephant. All I'm going to do is to keep sniffing the air to make sure that I avoid the big stinking pile of you-know-what, whether of the elephant or of another animal traditionally associated with the stock market.
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