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Sept. 27, 2011, 12:01 a.m. EDT
By Mark Hulbert, MarketWatch
CHAPEL HILL, N.C. (MarketWatch) "” Greece ate my homework.
Not only that, if you believe the financial headlines, Greece is responsible for almost every financial ill that has beset the investment arena over the last 18 months.
I say it's time the headline writers came up with a new story to "explain" what's happening to the stock market.
Consider last week, for example, when investors' concern about a possible Greek default supposedly caused the Dow Jones Industrial Average /quotes/zigman/627449/delayed DJIA +2.53% to lose 738 points and the combined market capitalizations of all publicly traded stocks in the U.S. to lose $865 billion.
Rather than focus solely on Greek debt, European banks and the U.S economy, many investors have begun to wring their hands about a new set of indicators.
How could Greece have been the cause of that, when Greece's total sovereign debt (counting both government debt and from the country's monetary authorities) amounts to $393 billion, according to the International Monetary Fund? It doesn't make sense, even if Greece's debt were completely owed to U.S. banks "” which it most definitely is not.
Blaming Greece makes even less sense when we focus on more than just the last week. Since the stock market high this spring, for example, U.S. stocks have lost approximately $2.5 trillion in market cap. Once again, the prime suspect is concern over Europe's debt situation.
Yet the $2.5 trillion loss is more than twice the total debt (from both the government and the monetary authorities) of Greece, Spain and Portugal combined "” the three PIIGS countries considered to be most in danger of default.
Why, then, do so many investment commentators persist in telling the story that Europe's debt situation is to blame? Because it's a convenient and easy explanation to fall back upon, especially in the face of a market that is otherwise acting so inscrutably.
How many of us have the guts to say that we don't really know why the market went up or down? Rather than admitting that, we instead tell stories "” akin to Rudyard Kipling's "Just So" stories, such as the one about how the leopard got his spots.
Blaming Greece is only the latest example of this. My perennial favorite is the oft-used explanation that the market went up (or down) on a given day because there were more buyers than sellers (or more sellers than buyers). This is just intellectual laziness, of course: During any trading session there are always the same number of buyers and sellers.
Investors need to let Greece rest in peace. That country has enough problems of its own without being asked to take responsibility for ours as well.
Click here to learn more about the Hulbert Financial Digest.
Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980.
Mark Hulbert is editor of the Hulbert Financial Digest, which since 1980 has been tracking the performance of hundreds of investment advisors. The HFD... Expand
Mark Hulbert is editor of the Hulbert Financial Digest, which since 1980 has been tracking the performance of hundreds of investment advisors. The HFD became a service of MarketWatch in April 2002. In addition to being a Senior Columnist for MarketWatch, Hulbert writes a monthly column for Barron's.com and a column on investment strategies for the Journal of the American Association of Individual Investors. A frequent guest on television and radio shows, you may have seen Hulbert on CNBC, Wall Street Week, or ABC's World News This Morning. Most recently, Dow Jones and MarketWatch launched a new weekly newsletter based on Hulbert's research, entitled Hulbert on Markets: What's Working Now. Collapse
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