A tough, tasty steak of a book, Justin Fox's "The Myth of the Rational Market" arrived last fall just in time to explain how and why the smartest economists and best-managed institutions on Wall Street nearly detonated a bomb in the world's underpants.
At the risk of oversimplifying: The abstract thing we call markets (trading in stocks, bonds, options, securities, etc.) is indeed rational -- predictable, mathematical, knowable. It's the human actors who are irrational, if not downright insane. Investors blindly follow the herd (do lemmings come in herds?). Institutions conceal debt and dry rot. Governments skew fundamentals, such as the real cost of credit. People see a crisis coming -- as in the recent housing and mortgage bubble -- and do nothing to avoid it.
All things considered, money would be better off without us.
Above all, Fox says, we have astonishingly short memories. Immediately after a crisis, people feel burned by and wary of the world of finance and investing. But then things even out, people start to make money on the upside again, and -- miraculously, tragically -- all memory of the downside is wiped like a schoolroom blackboard.
Where are we now on the cycle of knowing better and completely forgetting? Ask ING Direct.
On Dec. 29, the banking company unveiled a sunshine-addled advertising campaign to promote its ShareBuilder online brokerage division. The television spot, titled "Owners" (GWP Brand Engineering), was in heavy rotation over bowl-game weekend on ESPN, CNN, CNBC and Fox News, and has set up camp on the usual social media outlets.
Its timing, its mere existence suggest that, even in the midst of a grinding recession, Americans are well into the amnesia process that will tempt them back into the market. We are the battered spouses of investing.
The spot portrays three of what the company calls "Main Street Americans in everyday life." Translation: investing newbies. It opens with a twentysomething bicycle messenger running up a flight of stairs. "I own the world's No. 1 search engine," he says. In the next shot a young woman turns to the camera: "I own the leading alternative energy company." Then a construction worker, unloading his truck: "I own my wireless company. Not the other way around."
Then come the title cards with the not-awful catchphrase: "It's your future. Get your share. . . ."
Then a quick sequence of people merrily tapping away at their keyboards, with the voice-over: ". . . at ShareBuilder, where people are building the future they want by buying stock in the companies they want to own."
The spot closes with a helicopter shot of an orange car (a 1962 Chevrolet Impala, I think) tooling down Pacific Coast Highway, near Point Mugu. "Get on the road to happiness," etc.
Insofar as it neatly fulfills the client brief -- tempting young, inexperienced, do-it-yourself-minded investors into the market -- "Owners" can hardly be faulted. Notice the kinds of stocks that are being owned here: an Internet company (Google Inc.?), a green-energy company, a wireless company (a technical note: I think, in terms of investment, the world's largest alternative energy company might be Exxon Mobil Corp.). Note also the idea that investing can be an expression of one's cultural politics, even though investing with your heart and not your head is an excellent way to lose one's fanny.
The theme here, obviously, is empowerment. These hip technocrats are going to game the system, the market, and get their "share." There's even a little antidisestablishmentarianism. "I own my wireless company," the blue-collar guy says. "Not the other way around." Yeah, right! Wait until they send in the Pinkertons.
My question: Why would a company feel the timing is right to lure new investors into the stock market? The obvious answer is that the market is up, and wildly so. In March 2009, the Dow Jones industrials had slumped like a wounded rhino to a low of 6,547.05. It then jumped a ridiculous 59% in the last nine months of the year. (It closed Monday at 10,583.96, up 155.91.)
Unfortunately, the Flubber-like bounce in the stock market is uncoupled to any real improvement in economic fundamentals (employment, hiring, durable goods, balance of trade). Insofar as it appears that another bubble is in the making, the improvement in the market would rather seem to scare off skittish first-time investors.
Meanwhile, the very notion of stocks as sound long-term investments (ShareBuilder encourages a buy-and-hold strategy for its clients) is under attack. Various end-of-decade analyses have shown that investors who parked their wealth in the market in 2000 probably would have cashed out with less by the end of 2009. All told, it's a lousy climate to be selling online brokerage services.
Unless. Unless we can take this ad campaign as a slight ticking in the Geiger counter of American optimism. Can we? Dare we? The U.S. economy is led into and out of recession by consumer confidence, which turns on our faith in our institutions. If ING's market researchers have found a pulse, perhaps it's a sign -- a small one, to be sure -- that people are beginning to believe in Wall Street again.
Like I said, we've got lousy memories.