Anyone with the faintest interest in what happens on the stock market - any stock market, not just our own - knows that after it closes there will always be someone who will explain why it fell that day, or why it rose.
If these explanations had any validity, it would be possible to use them to forecast what the stock market will do on any given day. The fact is that every day there are ready made explanations which serve both for price rises and price falls. One day shares fall because the German mark fell; another time, shares rise - because the German mark fell. Such explanations bear no relation to cause and effect, and are therefore so much drivel.
The other day, it was learnedly explained that it was the downturn on the Hong Kong share market that caused the downturn in New York. And lo and behold, the Hong Kong share market went south again on Tuesday, but Wall Street actually rose, and in a big way.
The truth is, of course, that short term stock market fluctuations have no explanation in the realm of economic developments or policy. The sole explanation for such fluctuations is that they were caused by market players' behaviour that day. It is not even worth hazarding a guess as to what causes their behaviour, because it is by no means clear that all the players have the same behaviour pattern. It's a fact that for every seller, there's a buyer, and they cannot both be motivated by the same factors.
The only difference between daily fluctuations in the normal course of business, and phenomena such as we have witnessed on the world's share markets in the last few days, is herd behaviour on a large scale. Even this cannot be explained in rational terms, economic or otherwise.
The classic example of the impossibility of explaining short term stock market developments is October 1987's Black Monday on the US stock market. Following that crash, a committee was charged with the task of finding explanations for what had happened. Its members were the best economic brains in the USA, and they wrote a scholarly report. The conclusion was that there is no conclusion, at least in respect of the factors that started the snowball rolling. The committee only managed to find flaws in the way market makers operated (specialists in the US, jobbers in Britain). But there was no explanation at all for the initial panic.
What is completely clear as far as the current crash is concerned, is that there are no common characteristics among the different economies where it has occurred. It may be that, in the USA, people smell a recession on the way. It is possible that many over there believe that the growth trend has carried on so long, and unemployment is so low, that the chances of such growth continuing, and with it company profit growth, are slim. But this certainly doesn't apply to Germany and France, which are only just beginning to emerge from a long period of economic stagnation. In any case, as we have mentioned, the whole story began in Hong Kong. What influence is the Hong Kong dwarf supposed to have on the US giant?
Tel Aviv is another story, for two reasons. Firstly, the herd phenomenon on the stock market here is worse than elsewhere. This is part and parcel of Israel's neurotic national character. Secondly, the Tel Aviv Stock Exchange has fewer large institutional investors, particularly pension funds, than other stock exchanges, and so there is less of a long term investment element than on those exchanges. Put these two things together, and you get the scent of the casino emanating from Ahad Ha'am St