"buying opportunity": not just an insensitive statement from Harper, but unjustified

Anybody who knows financial markets would know that unless you really do your homework, you cannot say when there is a 'buying opportunity'. Certainly it would be wrong to say that, based on a casual application of the (economically unjustified) notion that stocks always bounce back after they go down, there was a buying opportunity back on Tuesday. That's what Stephen Harper did. Professionals who have done a lot of trades will tell that, unless you have done your homework and understand why a market is not being efficient, you won't make money betting on any simple strategy like mean reversion.

Now this post is not just about Stephen Harper. It's about commentators like Susan Riley of the Ottawa Citizen, who wrote, "...his logic is impeccable: stock markets go down, but eventually go back up", and Andrew Coyne who wrote of, "...Harper’s perfectly sensible observation that the present panic on the stock markets presents a remarkable buying opportunity ". Experience trading in the markets will tell you that, unless you figure out why somebody sold a stock down too aggressively, you don't have a better than even chance betting on it bouncing back. Right now, I'd say very few people, if any, really know exactly how bad the financial crisis is, and certainly not casual commentators who are mainly focused on Canadian politics.

Don't tell me that if you wait long enough, stocks will bounce back. If you wait, you have inflation to worry about. Look at the inflation adjusted return on stocks in the 1970's. Moreover, you can only wait until you die. In the long run we are all dead, as Keynes observed. For single stocks, consider an extreme example -- look at Lehman Brother's share price. Is it going to bounce back?

No, Stephen Harper's statement was not a sensible or logical statement that was simply insensitive. It was just wrong. As an economist, Harper should know something about market efficiency and how difficult it is to predict whether a stock price will go up or down. But I guess it was just too good an opportunity to try to express to voters his belief that the economy is probably okay.