Why should we take the stock market seriously?

I generally find the way stocks are priced to be a joke, and press coverage of the stock market to be an even bigger joke. My favorite recent example is today’s New York Times’ Common Sense column, which talks about herd mentality in analysts rating Apple’s stock as a Strong Buy right up until the shares fell off a cliff recently.

Notice the lack of coverage of Apple’s business fundamentals — the discussion is of the performance of the stock compared to the predictions. That’s topped off by extensive quoting of an analyst who did pick against Apple, without any kind of data-founded discussion of his performance overall. He was right about Apple’s recent share value, but we have no idea whether he’s right or wrong about anything else.

Corporate management at public companies is judged based on stock performance, but except in extreme cases, both stock prices and the coverage of them is almost completely divorced from the actual performance of these businesses.

I think a more interesting column would take a more data-centric approach. How does Apple’s share price compare to its financial results? How does that compare to other companies in the same business? How have the various analysts discussed in the article performed over time in terms of stock predictions? The column asks low quality questions and thus yields uninteresting answers.