Hope, Greed, and Fear in the Stock Market

Earlier this week I listened to a conversation on MSNBC’s Squak Box about the creation of a new index for judging the strength of the stock market. An argument was made against the creation of a new index (of course) saying that the old ones such as the DOW and the S&P 500 have been and always will be the best type of index. Why? Because they are based on hope, greed, and fear (at least in the reporter’s eyes). Basically, the stocks in those indices are those that have the highest market capitalization in their categories. I guess to be a market leader you need to manipulate people’s hopes (i.e. gambling), be greedy (can you say Enron boys and girls?), or scare the living bejezus out of people (I’m sure the Department of Homeland Security would be happy to oblige).

Is it possible for a new paradigm to emerge? Sure, nearly anything is possible. Looking at the global situation, is it possible that we will see it in our lifetime? Not likely. I think I’ll stick with the current market indicators for now too.