Caveat: I make no claims of the political correctness of my foregoing statements (nor have I ever, in any way, so this disclaimer is irrelevant).
I have a friend, Mark, who is manic depressive, which is more currently called ‘bipolar disorder’. In bipolar disorder, a person undergoes mood swings from euphoria to depression. These swings can be very rapid. There are three basic forms of bipolar disorder, of which poor Mark is type I, which is at least one episode of full mania and one of severe depression. Mark has had multiple episodes of both, and it’s getting worse.
In the manic phase, a person is easily distracted, tends to have a very elevated mood, gets very involved and can engage in ‘binge’ activities. In the depressed phase, the person is depressed, has difficulty concentrating, loss of self-esteem, and even thoughts of suicide.
Take earlier this year: Mark and I were talking about all the wild things that had happened in the first quarter. The protests in Wisconsin and Lansing, the Arab Spring and Libya, Oil topping $115, and the earthquake and tsunami in Japan. Me, I thought those sounded like bad things. Not Mark; he was in a full euphoria and nothing could get him down.
Then the news came that Osama bin Laden had been killed. Oil prices went down and the prospects for reductions in the costs of Iraq and Afghanistan looked good. But by now, Mark’s mood had shifted, and he got depressed in the face of good news.
So I thought around June, with the debt ceiling coming up, Mark would be depressed. But his mood shifted again, and he was happy, almost giddy. Even though the debacle in Washington had me concerned and more than a little embarrassed, Mark didn’t care. And then the debt deal was made. Then as the deal closed at the wire, Mark abruptly shifted his mood and became more depressed than I have seen him since 2008. Mark ran around his place, and started selling everything, from his dad’s gold watch to all the stocks in his 401(k). He calmed down for a day, and then S&P downgraded the government debt, and Mark went crazy. Now he wanted government bonds (even though they were downgraded), sold more stocks and in a reversal from his previous mood, bought gold under the idea that ‘the sky was falling’.
I thought that Tuesday might help him, since he’d been so despondent. And it did. In fact when the Fed announced they would hold interest rates low for two years, which I felt was good news, Mark felt better and bought back in. I gave a sigh of relief and hoped my friend was better. Until Wednesday, when he went crazy again, although this time he bought oil and gold and sold everything he bought yesterday.
Of course, Mark is wearing me out. One day he likes gold, the next he doesn’t. One day he likes stocks, the next he doesn’t. One day he’s afraid of Treasuries, and the next day, that’s all he buys. I called his doctor and asked what to do when a type I bipolar person is on a severe swing. His advice: “Be very careful until they go back on their meds, they can be dangerous.” Poor old Mark(et).
PS: My apologies to Warren Buffet, who originated this idea of Mr. Market being Manic Depressive. Clever ideas are worth stealing.