It’s barely 2pm on the east coast of North America and millions of people have already collectively shit themselves all because the stock market appears to have collapsed overnight.
And while some of these folks may not have dropped an actual turd in their drawers, the amount of rhetorical shit that has hitting the fan is absolutely ridiculous.
What on earth could possibly fuel such a massive shit-show long before most people have even finished their 2nd Monday afternoon coffee? The stock market of course, proving that the common man really has no grasp of how the economy works, nor do they possess the brain power to learn such intricacies.
Let’s take a step back together and understand exactly what’s going on here: The US markets took a pounding last Friday that even my whore of an ex-girlfriend would be jealous of* as the Dow Jones dropped 500 points in a single day. You don’t need to be an economics wizard to realize that such a significant drop isn’t good news for investors. Naturally, there was worry, but no panic, as the weekend closed in and trading stopped.
When the markets re-opened on Monday morning, the Dow Jones spread her legs once again and was this time greeted by a double penetration of biblical proportions, dropping almost 1000 points in almost 10 minutes.
As investors caught wind of the drop, they frantically did two things; the first of which being sell off their most volatile assets, only driving the crash further, and the second being finding a scapegoat to blame this event on.
They quickly found their scapegoat: China.
Yes, the Chinese have just recently devalued the Yuan in an effort to prop up their own flailing stock markets thanks to massive bull-ish commodity inflation, which has a direct negative impact on the US market as buying power now drops. China, who has been in a whirlwind of development in the last 5 years, has been buying resources on the global market like an absolute fiend, and certain economies have grown heavily dependent on the Chinese buyers. But when the sprawl of Chinese development slowed, so did their purchasing. This is the economic equivalent of “putting all your eggs in once basket” and when that basket suddenly doesn’t want any more eggs, bad things happen.
Thankfully, the US market is quite robust and is not entirely reliant on the Chinese buyers, like many third world GDPs, whom are now extremely fucked. So no problem, right? No, not really.
If it were that simple, we’d never see another recession again. We’ll be skipping the myriad of boring charts and fancy-pants banter that keep economists employed, so if you’re reading for investment advice, you’ve probably come to the wrong website.
The US economy has enjoyed a relatively strong showing since the global recession 0f 2008, which was an actual problem compared to what’s happening today. When markets crash, people snatch up stocks for pennies on the dollar, allowing their investments to grow exponentially throughout the recovery. It’s basic capitalism and works well for everyone, however there are quirks.
When “buy low” investments grow, they eventually will exceed their true value and will soon be traded at a price which isn’t entirely accurate and it just so happens that this trend occurs every 6-7 years; for those of you keeping score at home, it means we were due for one of these market cooling periods and it showed up right on time.
The issue is that most investors have snatched up the quality “buy low” stocks a few years before the common citizen catches wind of their value and begin to invest. This middle class cash injection in to the stock markets is what fuels the growth of stocks beyond true value and ultimately, leads to the sharp decline that you see today because of the normalization of the market.
So the drop in the Dow Jones today isn’t actually a massive cause for concern for the common man who doesn’t have any cash invested in the stock market; it’s a reflection of a healthy economy which is self correcting and avoiding synthetic inflation.
This is, however, a concern for you if you have a diverse stock portfolio and only about five grand to mess around with. The likelyhood is you’re trying to get rich quick and probably just got burned pretty badly. Sorry bout your luck. You might have better luck investing in this website.
This is but a small blip, a normalcy, in economic functions. Most media outlets would not let you believe this, as they seem to have some sort of hellbent panic agenda on their minds, but continue ignoring their pathetic jargon.
Ultimately, stock markets often make a terrible indicator for the health of any economy because they’re so easily influenced by extraneous factors. Only 55% of Americans own stocks and the majority of them have them in extremely bear-ish investments, which spell slow, steady profits over a prolonged period of time.
There will be a day when inflation skyrockets, unemployment shoots skywards and the eventual, imminent banking crisis creates anarchy on the streets, but today is not that day. So rest easy and spend your money on beer instead. But that will come so be prepared.
*Even though you were 84, you’ll always be the best sex of my life, Dolores.