Follow by Email

StatCounter

Friday, October 12, 2018

Wow the DOW!



I'm writing this blog post after the DOW has dropped 1300 points over two days. I waited an extra day to comment. Often the day after a big drop, stocks bounce right back. After two days, I'm beginning to wonder if this is a trend. Of course, by the time you read this, the stock market could have risen to new highs.

That's the problem with looking for trigger events. If every time you headed for the hills when the DOW took a tumble, you'd have taken a lot of unscheduled emergency trips for nothing. After a few days you'd have to come back and see if you still had a job. You might get away with that once or twice, but sooner or later you'd be out of work. While the world's financial market didn't collapse, your personal finances soon would.

Then again, what if the market keeps heading down? In spite of all the governmental manipulation, the economy has downturns. Sometimes they aren't too bad. Other times they are catastrophic. Recessions and depressions are pretty much baked into the cake. Nothing goes up forever.

If you are student of History, you've probably studied the Great Depression of the 30s. Most people think it was one horrible day in the markets then everything collapsed. It was actually a lot more complicated than that. There were ups and downs. At times, it looked like the economy was going to recover soon. Only over a period of months did it really sink in that a full blown depression was going on.

Our next depression may be like that. We could ease into a depression with a series of up and down moments of the economy. Months might go by before we admit to the reality of a depression. During the 30s, newspapers never used the word “depression.” Depressing economic news didn't sell papers.

Of course, this isn't the 30s. We live in a digital age where everything is connected and fast. Negative economic shocks could case a feedback loop that quickly locks up the whole system. We just don't know.

The only sure way to be “up in the hills” when an economic collapse happens is to live in them before bad things happen.

-Sixbears

12 comments:

  1. Things will always go up and down until the Lord comes. Then NONE of it will matter.

    ReplyDelete
    Replies
    1. Until he does, we have to struggle along as best as we can, using the gifts he's given us.

      Delete
  2. There are plenty of benefits from being 'up in the hills' when times are good too.

    ReplyDelete
    Replies
    1. Pretty much the way I feel about it.

      Delete
  3. My guess is that raising the interest rates was an excuse for stocks to become lower. But just a guess - I'm no financial guru.

    ReplyDelete
    Replies
    1. The financial gurus don't have that great a track record either.

      Delete
  4. Got to look at the big picture. Yesterday's drop was only 2%. No reason to panic. If you think the market is going to tank then its time to buy bonds while they are still cheap. Its all about balancing things out. Buy when the market is down, sell when it is up.

    ReplyDelete
    Replies
    1. The markets are not rational sometimes. Actually, a lot of times. 2% doesn't sound like much, but if it causes people to panic, it becomes reality. Economists do their best work in hindsight.

      Delete
    2. There are established patterns to the fluctuations and means to hedge risk against gains depending on how you distribute your funds. It's the turtle vs the hare thing. Steady slow wins the race every time if you are in it for the long haul. The mainstream media likes to hype it all cause they make money of spreading hysteria. They are full of BS 99.9% of the time. We have been putting money away for over 20 years now. We have never seen less than 8% growth, often more. 2017 saw 20% market growth. Any financial adviser worth his salt can make that happen for you. Its not rocket science. If he can't he soon finds himself working the friolator at Mickedees.

      Delete
    3. Slow and steady wins the race. It's not flashy, but if you are going to play the game . . .

      Delete
  5. I am too old to invest in anything for the "long term". So I don't invest at all. Now, if the banks fail, I will be in bad shape.

    ReplyDelete
    Replies
    1. At least you can eat your son's chickens. :)

      Delete