Investor community loves to love Lady Optimism. Woo her, flaunt her, and market her to highest possible degree. And even, when and if she dies, some would bet on her pre-mature resurrection to ensure their business of trading assets runs smooth.
Ever since the recent spell of terrorism started this month, market participants have been downplaying its impact citing the relatively lower frequency of blasts - based on its decreasing number on a quarter-on-quarter basis. One widely quoted source in the investing world is the South Asia Terrorism Portal (SATP), which highlights that number of blasts was down to 100 in Jul-Sep 2009, from 198 in January-March 2008.
Agreed that such incidents have somewhat reduced compared to last year, according to SATP and other various security and terrorism observers in the region, but should that be a bullish trigger, considering that many people are still losing their lives and of their loved ones.
This is not about morality or being sentimental; it is just that effective markets are supposed to price-in the socio-economic costs - which in Pakistans case stems mainly from terrorism, hurting institutions, killing thousands and indirectly affecting millions, keeping foreign investors at bay and diverting the governments focus away from the economy.
Besides, contrary to the way Pakistani stock analysts and media men have been viewing these risks; there is little wisdom in analysing security threats on the basis of trends, as if they were stock prices following a certain chartable pattern.
All those quant folks in the market should, in fact, be suffering from a heightened state of apprehension, considering that security breaches are like Black Swan events - high-impact, hard-to-predict and rare - beyond the realm of normal expectations. Case in point: the recent attack on Pakistan Army GHQ and twin-attacks in Lahore on Thursday, which killed more than twenty people in an early morning stint.
On a related note, many market participants do not seem to notice, that while the number of attacks has reduced, its timing and location has become rather terrifying. In the early days of this menace, terrorists were attacking fairly easy and soft targets like bazaars and chowks - but lately, in the last nine to twelve months, it is the security dens and the protocol-led ministers who are being assaulted.
So, its not that seeing the glass half full is a cardinal sin. But its just that one should at least call a spade a spade. Diluting the intensity and severity of the recent spell of attacks in public, by way of highlighting its slightly lower frequency, is akin to making citizens psychologically immune to such untoward incidents. A little myopic and uncouth - shouldn you say.
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