ONLY TWO WEEKS AGO, when I posted The Sun, the Moon, and the Truth (https://www.moviesmarketsandmore.com/1838-2/), it hadn’t occurred to me that the financial sector might slip in at the back of the alternate reality parade and march into make-believe with other swarms of society.  In hindsight, there was already a “mania for the ages” in progress (https://www.moviesmarketsandmore.com/a-mania-to-rule-them-all/), and what is a mania if not an alternate reality and a distortion of truth–in this case truth as value?  One source I trust cited a pandemic-induced surge in day-trading as a source of fuel for the markets (most day-traders play the “long” side only–they are buyers who follow an uptrend or  “momentum traders.”).  This surely helps to explain the near vertical rise in the S&P500 index (seen below). But there’s more.

GameStop stock–to name only one–is “squeezing” higher. That means that much of the buying is from short-sellers who thought it was overpriced at $100/share a week ago. But day-trading neophytes saw it going up and jumped on. Today it touched $370/share (see chart below). The short-sellers had bet on lower prices and sold the stock first hoping to buy it lower later, but now have to buy it higher and take the (huge) losses. Almost nothing compares to these short-covering rallies; stocks triple and quadruple in days. I watched with similar disbelief  the strikingly similar events of the late ’90s tech bubble. Yet the stock market provides an unusually useful analogy today, the idea of Truth as value.

Even though the great majority of shareholders prefer higher share prices (of an individual stock or an index), unnaturally high prices can only prevail as long as demand (buying) can dominate supply (selling).

Sooner or later, value–as Truth–prevails; prices find equilibrium and revert to some more sustainable mean–whether the result is pleasant or not for the investors who bought in to it.

We have to hope the distortions of Truth in politics will revert to a sustainable mean, too. There has to be an increase in demand for fact-based information–whether it’s pleasant or not–and a rejection of those “other” realities that feed on strong emotion or falsely promise to sate the desires of those who “buy in” to them.

WRH