Smashing the thermometer

Should we close the markets to give them time to cool off?

No.

1. The markets don’t need to “cool off.” Although the wise heads (the same ones who gave us the underlying conditions) are calling this an unreasoning panic, I call it just a change in underlying valuation assumptions. If credit is tighter, profits are lower, p-e’s go down, and the present values of shares go down accordingly. It doesn’t take much reassessment of expected profits to have a big effect on prices. Not to mention the increase in risk.

2. If there is a panic, closing the markets will only exacerbate it.

3. Millions of people interacting in global securities markets are our best source of information about what’s going on. It would be insane to shut down information sources when we clearly need more transparency rather than less.

4. Shutting down markets may make us feel better temporarily (no drumbeat of bad market news).  But we don't need to feel better.  We need to feel bad enough to fix what's broken.

When markets last closed, in 2001, it was because the people and infrastructure were physically damaged. Now we’re healthy, so we should trade