Friday, June 2, 2017


By Bill Hendrick
c. 1999 Cox News Service

New York - Lots of people find peace in the 350-year-old graveyard of Trinity Church, the quietest spot on Wall Street, a resting place for the quick and the dead. Strollers gawk at hundreds of crumbling, time-blackened tombstones.

At noon, office workers shove their way off bustling sidewalks and, sack lunches in hand, dart between bumper-to-bumper yellow cabs and fume-belching buses to get to the ancient burial ground first. The quickest fill the few benches.

There's no pushing and shoving. No hawkers handing out leaflets for massage parlors. And no red, green or blue jackets worn by denizens of the nearby New York Stock Exchange, a notoriously superstitious lot. Especially now, with the Dow Jones industrial average hovering like a ghost near 10,000.

Everyone agrees it's an important number, a major psychological threshold, a portent of something. The question is what.

Will the Dow continue its remarkable rise, or will that big, round number spook the public into selling? How will it affect the masses, since it's psychology -- fear, greed, rationality and irrationality -- that drives the stock market?

"A number like 10,000 captures public attention, makes them make decisions," says Charles Smith, 60, chair of sociology at nearby Queens College and author of the classic book, "The Mind of the Market." "In that sense, it's a psychological mark, and no one can predict how the public will react."

Psychology is the science of what makes people tick, why there's a tendency for people to believe in magic, even to the degree they allow superstitions to guide their judgments.

"There's a clear belief in transcendent powers at times like this, that external forces we don't understand control the market," says Smith. "It's magical thinking."

Which explains why red-ink pens are verboten among stock traders scribbling down orders. It implies blood, loss, bad luck; why expensive Cross pens are the rule, implying success; why traders won't spend time among Trinity's gravestones, most engraved with skulls and crossbones that people of the 17th century thought would ward off evil spirits.

"The number 10,000 has become a kind of Rorschach test," says Smith, referring to the famous ink blots that psychologists use in personality evaluations. "What we have here is the classic mass psychology syndrome."

The number, he feels, could create a lemming mentality in either direction, making people buy stocks because they think everyone else is, or sell for the same reason.

"People are easily swayed," says Smith, whose latest book, "Success and Survival on Wall Street," is due out this summer. "There are all these young Turks who've never been through a bear market who think the sky's the limit. I know people whose minds tell them to stay out, but their sons and daughters have been riding this market up, so they are following them into the unknown."

Stuart Vyse, a psychologist at Connecticut College, says 10,000 on the Dow should be meaningless, but its impact on the public psyche could be dramatic.

"To optimists, it's a great breakthrough," says Vyse, author of "Believing in Magic: The Psychology of Superstition." "To pessimists, it's the foretelling of a fall."

Because nobody knows, he avows, everyone will be looking for omens.

"We use numbers as goals, like the year 2000," says psychologist Jerilyn Ross of the Ross Center of Anxiety and Related Disorders. "It's why we mark our 50th birthdays but don't notice 47 or 38. It's just pure superstition."

But superstition affects psychology and makes people act.

A classic example is the Elliott Wave Theory. Made famous by psychologist Bob Prechter Jr. of Gainesville, once the most popular analyst on Wall Street, it holds that markets grow and decay in five steps -- up, down, up, down and up, and that each move can be predicted with mathematical precision. Supposedly, these "waves" reflect collective psychology. In the '80s his predictions were blamed, or credited, for causing many ups and downs.

Marc Lipson, a finance professor at the University of Georgia who's spending this year doing research at the NYSE, doesn't believe in the magic of numbers but still got swept up in the euphoria last Tuesday when the Dow first surpassed 10,000.

"Technically speaking, the 10,000 mark means nothing," Lipson says. "So why the excitement? Why did I go down to the floor four times in hopes of seeing it happen? Why did I cheer when it finally did and I was there? Why did my face light up with a grin, and why did I really enjoy the event? It's just like when you see the odometer of your car turn over from 9,999 to 10,000. Though you know the car is just the same before and after, you feel like you witnessed a special moment."

Dr. Terence Sandbek, a clinical psychologist and expert in paranormal beliefs, says numbers are psychologically fascinating because they represent limits -- or starting points.

"People think, 'Wow, 10,000.' It must really have some significance," Sandbek says. "To a numerologist, all numbers have some sort of esoteric significance. The human mind likes to simplify so that a nice number with lots of zeroes is more pleasant than a mean number that is hard to remember. The stock market is random, but Wall Street is full of people who've convinced themselves it's not."

To say the least.

Many prognosticators employ "Fibonacci analysis," based on a numerical phenomenon discovered in the 13th century by an Italian mathematician named Leonardo Fibonacci. In the Fibonacci sequence, each number after zero equals the sum of the two preceding it -- 0, 1, 1, 2, 3, 5, 8, 13, 21, 34 and so on to infinity. Divide the larger into the next smaller -- 34 into 21, for instance -- and the answer approximates 0.618. The ratio was supposedly used to construct the Parthenon, and such creative work using the ratio is thought to be pleasing to the human eye.

Modern disciples claim the numbers capture a law of nature, and that Dow gyrations can be predicted by looking for the ratio in sawtooth chart patterns.

But even more down-to-earth analysts, who scoff at such numerical notions as superstitious nonsense, see Dow 10,000 as momentous.

Edward Yardeni, chief economist for Deutsche Bank Securities, says it's likely to affect the psychology of millions of small investors, and the mutual fund managers who control the funds of millions of others.

"It could be good, because there's a certain amount of national pride in hitting 10,000," he says. "This rooting effect can push it higher, drawing in more money, adding fresh fuel to the bullish fires."

On the other hand, many might see 10,000 as a limit, a top, a slippery slope atop Mount Everest. Yardeni has a foot in both camps. He's predicting a Dow of 11,000 by summer but that it'll plunge to 7,400 by year's end. He correctly predicted in the early '90s that the Dow would hit 5,000 in 1995. That same year, he predicted the Dow would hit 10,000 in 2000.

"It happened sooner than I expected," Yardeni says.

Phil Larkins of Legacy South in Atlanta feels the public has been deluged with so much media hype that their psyches will tell them to put more money into the market.

"Keeping the market down now is like holding a beach ball under water," Larkins says.

On the other hand, it's been shown time and again that it's dangerous to predict the psychological impact on Americans of anything that happens on Wall Street. The Dow quickly recovered from the 1987 crash, and hardly anyone thought mass psychology would turn against George Bush -- who'd led the nation through the successful Gulf War -- simply because the Dow was headed south.

Thomas Gilovich, a Cornell University psychologist and author of the book "Why We Know What Isn't So," says hitting 10,000 will cause a reaction, one way or the other, "even if the basis of that reaction is irrational, and that's the psychologically interesting part. It's likely to give people pause, at least for a short time. But because of the way psychology works, people will soon generalize, even from an event that has no meaning. Some will decide 10,000 means this is just a start, and others, that it's the end."

Robert Seijas, a top executive for Fleet Specialists and a member of the Big Board, says euphoria already is pulling in suckers.

"You hear about the garage mechanic losing two years' savings on Internet stocks," he says.

But while it may take awhile to see which way mass psychology blows the market, it's clear that small investors are upbeat, even though many of the "money runners" who control their funds aren't.

"The market is a momentum machine," says Phil Judson, 51, a tourist from Dallas who was visiting the NYSE with his family last week. "We get nervous when it gets this high, but we're happy."

He's not even thinking of selling.

Others who up to now have never owned stocks are thinking about buying.

"I'm going to put some money in the market now that it's hit 10,000," says cabbie Abu Na-aata, 42, letting out a passenger in front of Trinity Church. "It seems like it's going up more."

But it's that kind of talk that sends chills up the spines of experts. Wall Street lore holds that when small fry start buying, it's a bad omen for big fish.

There may also be symbolism in the fact that though Wall Street dominates world finance, it's only seven blocks long and starts at a river and ends at a graveyard.

·       Caption: Photo WALL_STREET_MARKETS.JP344927: Traders watch the Dow on Friday, when it crossed the 10,000 mark and fell back. / ADAM NADEL / Associated Press
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