On Wall Street There’s Still One Bull Market—in Metaphors to Explain Falling Stock Prices

From a Wall Street Journal story by Gregory Zuckerman headlned”Wall Street Reaches for Clichés to Excuse Your Withered 401(k}”:

On Wall Street, there’s still one bull market—in metaphors to explain the fall.

Tumbling prices for stocks, bonds and cryptocurrencies have investment pros and executives scrambling to explain what happened, and why so many were caught flat-footed. Many have turned to the title of Sebastian Junger’s 1997 book about a fishing boat lost at sea when three dangerous weather events converged.

“This is like the perfect storm,” Mizuho Group analyst Dan Dolevrecently said about the crypto collapse.

We’re in a “perfect storm with energy prices,” heating-oil executive Katie Childs added.

Researcher Paul Rowaday used the same blustery image to explain the challenges facing Robinhood Markets, while analyst Dan Ives employed it for the tech-stock tumble.

The perfect storm is not alone. Blockchain executive Ahmed Ismail, seizing on another contender for the year’s most beloved bromide, labeled the recent collapse of stablecoin TerraUSD “a black swan event.”

Offering crypto reassurance, Coinbase Global CEO Brian Armstrong declared that his firm wasn’t at risk of bankruptcy even if in the event of “a black swan.”

That image, of course, refers to the colorful term for an unpredictable event popularized by Nassim Nicholas Taleb in his 2001 book “Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets,” and later bestseller “The Black Swan: The Impact of the Highly Improbable.”

Market and economic downturns have always sent analysts searching for easy and relatable explanations. Often they reach for the same clichés. In 2008, with the economy in recession, many pointed to another nautical reference: “headwinds.”

The phrases suggest troubles resulting from factors that, much like natural disasters or weather events, even experts couldn’t have been expected to anticipate. In May, instant-delivery company Getir Perakende Lojistik told employees it was cutting 14% of its staff to “adjust to the new climate.” JPMorgan Chase chief Jamie Dimon warned that an economic “hurricane” was brewing.

“People are going back into the vault of clichés,” said Sydney Finkelstein, a corporate-leadership professor at the Tuck School of Business at Dartmouth College, referring to the recent, um, perfect storm of buzzwords.

Some seem to find comfort in metaphors, however mixed. In May, CEO Sebastian Siemiatkowski of Klarna Bank, in announcing layoffs at the Swedish fintech company, explained to staffers that “Klarna does not exist in a bubble.”

He added: “While crucial to stay calm in stormy weather, it’s also crucial not to turn a blind eye to reality.”

Descriptive imagery can be helpful, providing a way to visualize an event or challenge. Vicious periods for stock investors have long been described as bear markets (often with a dependable modifier, “grinding”).

Spanish philosopher José Ortega y Gasset wrote: “The metaphor is perhaps the most fruitful power of man. Its efficacy verges on magic.”

But many see the reflexive resort to trite analogies as unhelpful, even misleading. “People feel a need to make sense of events and find explanations, and this gives a veneer of credibility, but in fact the executives have no clue and are flailing around like everyone else,” Mr. Finkelstein said. “It’s the perfect excuse to shift blame.”

Mr. Taleb is just as critical of those who invoke the concept he wrote about. In “The Black Swan,” he describes events that carry extreme impact and are outside the realm of regular expectations.

“Very few people understand what the term means. It’s tremendously frustrating,” said Mr. Taleb.

It offends him that some people use the term for this year’s market doldrums and cryptocurrency collapse, which many had anticipated and which aren’t unusual by historic norms.

“You have to be a moron to think these are rare, unpredictable events,” he said.

It’s not entirely clear why lazy analogies seem more popular in the executive suite than in other areas, such as the halls of power in politics. Academics have their theories, though. “The perfect storm suggests a degree of impotence in the face of challenges, which is usually not the best look for politicians,” suggests Professor Finkelstein.

Some executives are trying their best to ignore dark clouds or find rays of sunshine, so to speak. In May, after the S&P 500 dropped 4% in a single day, Robinhood sent customers advice on dealing with the market’s “volatility,” rather than use a more downbeat description of the plunge. Louis Schoeman, CEO of Forex Suggest, in June called the crypto selloff a “cleansing process.”

That month, instant-delivery startup Jokr SARL said that it was profitable—based on “fully gross profit positive on a group level for our local business across all of our countries after 12 months of operations,” a metric that left tax expert Robert Willens scratching his head. “It’s an extreme example of a company devising its own eclectic metric to highlight its ‘profitability,’ ” he said.

Mr. Junger cautions about using his turbulent title to explain these troubled economic times. The perfect storm he wrote about resulted from a rare convergence of three weather patterns yet wasn’t shocking or unexpected, at least to meteorologists. Sailors were caught too far out to sea.

Business leaders and financial experts may be more akin to meteorologists, who had reason to expect a storm, than the sailors. “It seems like there are some cautionary actions that can be taken in finance that you can’t a thousand miles out at sea when there are alarming things on the horizon,” Mr. Junger said.

The resort to the perfect-storm explanation of events is understandable, he said, even if it rarely works as an exact analogy. At least the Wall Street analysts and corporate executives aren’t using it for life’s mundane setbacks.

“I’ve heard people say it’s a perfect storm if they’re late picking up their kids from school,” Mr. Junger said.

Gregory Zuckerman is a Special Writer at The Wall Street Journal, ​a 20-year veteran of the paper and a three-time winner of the Gerald Loeb award — the highest honor in business journalism.\

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