We're nation of needless worrywarts

By DAVID MOON, Moon Capital Management
May 2, 2004

A recent study reported in the Annals of Internal Medicine reports that two glasses of wine per day increases your risk of colon cancer by more than 20 percent. I am sure plenty of folks seized on this news and used it as justification to prove some premeditated conclusion, causing all sorts of worry and paranoia among moderate drinkers who previously thought their imbibing carried some cardiovascular benefits.

News stories about the study did not report that the odds of getting colon cancer among teetotalers were 0.94 per hundred people. Among drinkers, the risk increased to 1.13 per hundred people. There's your 21 percent increase.

Perhaps a statistician could explain why that increase is statically significant, but it should have no bearing on whether a person worries about getting colon cancer. According to this study, your odds are about 1 percent, regardless of your alcohol consumption.

We have become a society of worriers. And we worry about the things that are least likely to impact our lives. It's as if we have some innate need to fret.

When Alan Greenspan testified before the Senate Banking Committee on April 21, the news was that the Fed was no longer concerned about deflation; inflation and increased interest rates were now more likely than before. The stock market dropped in reaction. Less than a week later, a Wall Street Journal headline proclaimed that subsiding inflation worries were responsible for a big positive day on Wall Street.

If investor sentiment can change that quickly, why were people worried about inflation to start with? So what if the Fed increases the couple of very short-term interest rates over which it has direct control? Rates are still lower than most people would have ever imagined only ten years ago. The fear of an increase in the Fed funds rate from 1.00 to 1.25 percent doesn't impact most people, yet that was the big story among market pundits for a week. The guys on CNBC needed something to worry about.

The problem is our fascination with both instant gratification and depression. We want easy and quick answers to things, even if the answers are wrong. Do you want to cut your risk of a heart attack? Drink two glasses of red wine a day. Simple. Want to ward off colon cancer? Cut all alcohol from your diet. Simple. Useless, but fast and simple. We want easy answers to inherently complicated issues, and as a result, we lose focus on the few really important decisions we make in our portfolios - and our lives.

Most people who amass large investment portfolios can contribute their wealth accumulation to one or two factors. The two most common reasons people accumulate money are steadily saving and the outstanding performance of a handful of stocks in their portfolio. Seldom does someone accumulate significant wealth by focusing on daily rumors and worry points. So what if Alan Greenspan sneezes? Does that really do anything to the value of General Electric?

Don't sweat the small stuff.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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