Chicken Little Has a Coop on Wall Street

By Sydney H. Schanberg
New York Newsday, October 20, 1987

There is panic on the financial markets – and a lot of baloney. 

When the stock market was soaring upwards through the clouds, faster than a speeding bullet, men who think an $800 cloak of pinstripes can hide the nakedness of their imagination would get up each morning and offer up baloney-sandwich explanations for the boom. Interest rates are down. Housing stats are up. The trade gap is bad, but not as bad as it might be. The budget deficit is bad but, well, it doesn’t seem to matter. The only thing they didn’t tell us was the truth, which was that they didn’t have the foggiest idea why the bull market was going on so long. But they couldn’t actually say that out loud. That would spoil all the fun, wouldn’t it? The gamblers might stop coming to the casino.

It’s not that some of their explanations didn’t contain a piece or two of reality; it’s just that these “market analysts” didn’t know which explanations or which pieces.

So now we have a panic. Run for your lives, the know-nothings shout, the theater’s on fire.

While there are good economic reasons for the stock markets to come soberly down out of the clouds — negative indicators both at home and in the world markets — only unreason can explain the hysteria, the panicked, violent waves of selling. It is as unreal as was the empty-heads euphoria that preceded it.

This is one of those every-man-for-himself kinds of pain. Not all panics fall in this category. When a hurricane or earthquake or other natural disaster strikes a community, there is great fear and a primal urge toward panic, but the almost certain byproduct is a knitting together of that community. People rush to rescue and comfort those they hardly knew before the tragedy.

Have you heard any good rescue stories out of Wall Street over the past week? While I wasn’t looking, did Paine Webber or Merrill Lynch or E.F. Hutton set up shelters to take in destitute investors or psychiatric aid stations to ease the mounting anxieties and depressions?

No, this panic is of the stampede variety. It is a true descendant of what happened on the Brooklyn Bridge on Memorial Day in 1883, six days after it opened, as throngs of people on foot filled the span. A woman in the crowd fell down, someone shouted that the bridge was falling and in the resulting frenzy, 12 people were trampled to death.

Panics of this nature are ugly to watch, even when people aren’t being killed. It is because rationality departs and the thin veneer of civilization gets stripped away, revealing the ugliness underneath. We like to imagine ourselves as the higher beings in the animal kingdom — and sometimes we are — but at moments like these, the furry creatures who run terrified to escape a forest fire are quite rational in comparison to humans running to escape falling stock prices.

Like lots of others, I witnessed many scenes of panic in Southeast Asia during the Indochina War — people fleeing shelling or bombing, people fleeing advancing troops, people trying to escape imminent massacres. In every instance, the people I remember most vividly are the ones who kept their heads, the ones who did not cast off their dignity. There were many.

I do not suggest an analogy exists between Wall Street in pain and the extreme situation of a country at war. But human panic looks pretty much the same in all its guises. And when the tragedy consists of losing money rather than lives, though it can still be a tragedy, we run the risk of appearing very foolish, indeed.

Yesterday, amidst the Wall Street wreckage, the unnerved “analysts” were still groping for high-sounding theories to explain the chaos. But all they could come up with was more of the baloney — the usual superficial patter about higher interest rates, a weaker dollar, fears of inflationary pressures, heightened tension in the Persian Gulf and the exacerbatory but not new factor of computerized selling by the major financial houses.

There was one sign of encouragement. Some of the experts actually admitted they didn’t have a clue. “I don’t have words to describe this,” said an analyst at Oppenheimer & Co., who was quoted by the Associated Press. He added: “Unless you can make a case for a major recession or World War III, we cannot really justify such a severe decline.”

We can hope that those on Wall Street who keep their heads will be the ones who prevail. For panics reveal not only the worst among us but also the best. And the best are people who hold the center together while others are spinning out of control.

Thomas Paine offered an optimistic view of panics a couple of centuries ago. He wrote: “Panics, in some cases, have their uses; they produce as much good as hurt. Their duration is always short; the mind soon grows through them and acquires a firmer habit than before. But their peculiar advantage is that they are the touchstone of sincerity and hypocrisy, and bring things and men to light, which might otherwise have lain forever undiscovered.

It would be heartening this time if Paine turned out to be right.

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