TABLOID NEWS SERVICES, INC.
MATT WELCH writes from SAN FRANCISCO
[Sept. 4, 1998) -- The world's financial markets continued to collapse Thursday, pushing up the Nonsense Index by 141.06 points, or 8.6 percent.
The Nonsense Index, compiled by a consortium of Deutsche Morgan-Freeman, ING Grendel Securities and TABLOID, measures the daily rate of incoherence disguised as market analysis.
"Initial confirmation of a reversal will come on a move above 135.60, which was a reaction high on the way down," said Mark Roberts, technical analyst at I.D.E.A. Inc., explaining to Reuters about the dollar's fall against the yen yesterday.
"Initial targets will be (near) quite a lot of congestion -- resistance and support around 138.50."
Randolph Donney, director of capital markets at Pegasus Econometric Group, initially boosted the NI 27 points with his explanation of Thursday's dollar/deustche mark trading, which left the greenback at a 9 1/2 month low.
"We're looking at a minimum [Fibonacci] retracement objective at 1.6822 and you've got the swing low from last November at (1.6935)," Donney told Reuters, apparently using the NI tactic of speaking in brackets and parentheses.
Donney rebounded 13 points near the closing bell with his sudden switch to the English language: "It looks ugly," he said.
For seven years, as financial markets have doubled and tripled the world over, market analysts and trade journalists have developed a careful system -- called the "logic of the market" -- of giving rational explanations to international money flows. Every 13-point loss in the Dow Jones Index was attributed confidently to "profit-taking," a "minor correction," or "new investor jitters."
The soothing precision of the terminology has been useful in opening far-flung countries to foreign investment, and convincing Middle America to invest in stock funds. While the people made money, the countries were able to finance their debt and make money available for their businesses. It didn't matter much that the analysts may have been simplifying things by describing millions of conflicting transactions as "a reaction to remarks by the deputy chair of the Pacific Stock Exchange."
The honeymoon ended last week when the Dow Jones index plummeted 512 points -- totally meaningless as a point drop, but interesting as a percentage tumble -- and commentators began scrambling to convert the new chaos to the Old Math. "We're all very worried down here," blurted Charles Lazlo, KNX-FM's long-toiling calculator in Los Angeles, as the Nonsense Index climbed 13 percent. "We're all looking for guidance from Japan and Russia."
Brokers unanimously declared that "political chaos" in Russia drove them to sell stocks, when the Parliament there refused to ratify Victor Chernomyrdin's nomination as prime minister -- even though every prime minister ever nominated by President Boris Yeltsin has only been approved on the third vote (after three such votes against the nomination, Parliament is automatically dissolved).
Meanwhile, officials in the long-suffering countries of Latin America, who have obediently followed the dictates of international investors during five years of dramatic and painful economic reform, are starting to lash back at the fund managers who have routed their currencies and stock markets over the past month. This despite economies that are generally healthier than Japan's, and a computerized system of that puts such information at the fingertips of every single mutual fund investor in the world.
"Markets are certainly overreacting and not discriminating at all between countries that have done their homework and are taking care of their fiscal positions, taking care to have a flexible, modern and responsive exchange rate regime," Mexico's finance minister, Jose Angel Gurria, told reporters at a regional International Monetary Fund meeting in Washington yesterday, as the Mexican peso was being driven to a record low of 10.14 to the dollar. "Everyone is thrown in the same basket, saying they are all emerging markets."
International investment ratings agencies jumped on Latin America yesterday, with Moody's Investors Service downgrading foreign debt ratings for Venezuela and Brazil, and placing Argentina and Mexico "on review." After the announcement, Brazil's stock index plunged 8.6 percent, while Venezuela's lost 7.5 percent.
Finance ministers accused of the ratings agencies of overcompensating for having failed to predict that collapse of southeast Asian currencies.
"This episode linking Argentina, Mexico, Venezuela and Brazil just shows that certain agencies must invest much more in developing a capability to assess sovereign risk," Brazil Finance Minister Pedro Malan told reporters. "It is one thing is to assess a commercial firm. It is far more complex to assess sovereign risk -- as their experience in Asia in recent times clearly indicates."
Meanwhile, the only Latin American country that appears untouched by the psychological spasms of world markets is tiny Guatemala. Why?
According to Reuters, it's because Guatemala "does not have a developed equities or capital market so no one is worried about investors pulling out of local holdings and seeking refuge in dollars."
This did not deter Charlie Payne, head analyst at Wall Street Strategies, from pushing up the Nonsense Index 18 points yesterday with his analysis.
"There are pockets of leadership in the market. It is not capitulation," Payne told Reuters. "Next week when everybody is back, the bulls are going to make a little noise."
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