Chasing Their Tails

James Surowiecki writes about the investor class information overload:

These markets and indexes are valuable as a way to help investors hedge risk. But, in an environment of profound uncertainty, investors have a natural if troubling tendency to turn to them as horoscopes, particularly since they now get so much attention in the business press: you have only to turn on CNBC or go online to find that the Japanese market is cratering or the VIX index soaring. The result is to draw investors away from the grind of analyzing corporate performance and economic fundamentals, and to encourage pure speculationinvesting as an exercise in anticipating what other investors will do. Meanwhile, traders in other markets are looking to our stock market for guidanceNikkei traders usually react positively when the Dow risesor, like VIX and futures traders, are overtly trying to forecast what our stock market will do. Investors find themselves trapped in a mirror maze, like the gunslingers in “The Lady from Shanghai.”