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Yesterday was the 45th anniversary of the Warsaw pact nations invasion of Czechoslovakia.
That’s not ordinarily something that I use an an introduction to a Daily Market Update, but bear with me. After all, it’s Wednesday and that’s usually a slow trading day for us. The early market action didn’t give any reason to think that this Wednesday would be different from any other.
Except that today we sit and await the release of the FOMC minutes in an era when the Federal Reserve has taken on new transparency and current members are suggesting that even more transparency may be warranted.
45 years ago on that date, my family and I were supposed to leave Hungary, where we had been vacationing, having returned to the country we left across a land-mined border in the middle of the night twelve years earlier. Hungary, a member of the Warsaw Pact, a member Soviet Union satellite nation had only recently allowed those who escaped during the 1956 Revolution to return as tourists, once they realized that tourist dollars weren’t in conflict with dogma.
Our visas, which were absolutely necessary for travel, as was reporting your itinerary to local authorities, were due to expire on that date.
Funny thing, though. The airport was closed.
There were fighter jet planes flying overhead and we were turned back by soldiers who wouldn’t allow entry onto the road leading to the airport. My parents were smart enough to know not to ask questions. Questions required answers and that was considered to be information.
If Seinfeld had existed in Hungary the certainly would have been a character intoning “No information for you.”
Returning to the hotel, the clerk asked for our visas and before we knew it the police were at the hotel threatening to have us arrested for over staying our visas, suggesting that perhaps we were spies.
The American Embassy could provide no information. Why were the airports closed? When could we leave? They knew, but in a land where information was so tightly controlled they couldn’t be seen as the source of a leak that would have preceded any official local government spin.
They did tell us that all borders were sealed and informed us that we could stay at the embassy if our request for visa extensions wasn’t granted.
An embassy worker suggested a “gratuity” could get us an extension and it did. My father later told others who had been denied that the equivalent of about two dollars would buy a visa extension.
Back in the hotel lobby, television pre-empted its usual airing of the endless loop of “The Flintstones” episodes to play patriotic kind of music. Forget about trying to get a newspaper that gave out any kind of information. Not only were the borders sealed, but so was all flow of information and so were people’s mouths.
Three days later we were allowed to leave and arrived in Paris. It was there that we saw images of Soviet and Warsaw Pact tanks on overhead televisions in the airport, but we still had no clue as to what was happening. It looked as if it was World War II kind of archival footage.
But the International Herald Tribune told the story. The “Prague Spring” as it had become known under the liberalization of Alexander Dubcek was crushed, just as Poland and Hungary had their brief attempts to rid themselves of Soviet yoke crushed.
It is absolutely amazing at how a government can entirely control our access to information. I don’t know how long it took for normal Hungarian citizens to learn what had been going on next door to them, but they certainly didn’t talk about it on the streets while it was all unfolding.
So why am I recalling old news of 45 years ago? Mostly because Eddy Elfenbein of “Crossing Wall Street” fame made note of the anniversary and suggested I write a post. I had let the day just slip by, never giving it a thought.
Now we’re awash in information. The one-time opaque Federal Reserve is now like your best friend telling you more than you need to know or more than you can understand. But you have to be right there when that friend spills all, because you need to know before any of your other friends.
Government reports, ADP, Tweets, blogs, Instagram and an endless supply of other sources of information with the only gatekeeper being the one who is supposed to ensure that all get equal access to its release, give or take a few nano-seconds, for give or take a few million.
If Hampton Pearson, the usual purveyor of information on CNBC had it in him to give away the minutes in exchange for blow and hookers, society might be better off having a chance to chew over the information rather than reflexively responding to it.
The problem has become one of interpretation of news. Keeping the population ignorant of the news is one thing, but an over-flow of news is far better because it creates a new kind of ignorance, one that has its genesis in too many competing and often contradictory bits of data that cause us to proceed irrationally or haphazardly and sometimes bounce from one action to the next without a coherent plan.
In a society where information is strictly controlled or parceled, there isn’t much in the way of interpretation necessary. You simply knew that the truth was diametrically opposite of the official version.
This afternoon will come word by word parsing of the FOMC minutes. Although this month is likely to be a non-event, much like last month, the interpretations can differ wildly and the markets can go into spasms from too much attention being paid to the details.
In the meantime we continue to get conflicting earnings reports and alternating positive and negative market reactions to the news. Just think about the names mentioned yesterday. Anadarko, Intel, Chesapeake Energy and add to those Home Depot, JC Penney and others and see how quickly their fates are altered with the flow of information and the parsing of that information. It can make the difference between putting a $250 price tag on Apple or placing a $700 target. Same information, yet two disparate interpretations.
So often the net result of that flow of information is minimal change, but a wide range of reaction. Just look at the immediate reaction to the release of the FOMC minutes this afternoon. Someone or their algorithm interpreted the minutes in a negative manner, sending the market down an additional 70 points in 5 minutes, only to see it then add 130 points in the next 40 minutes.
Increasingly, I’m beginning to believe that being in an information vacuum has its merits. At the very least ignoring the party line, taking note of the jets flying above and having a goal that is immutable.
OTP Sector Distribution* as of August 21, 2013
* Assumes equal number of shares in positions
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