Or, what goes up, must come down. Good day all. You may have noticed that the Stock Market took a beating. The usual suspects in the media are screaming that “The sky is falling! The world is ending! We’re all doomed!”
Me? I’m yawning. I’ve seen this happen before and I will probably see it again. The market has had a massive run up in the last year and is due for a correction. Basically, investors are selling their stocks and cashing in their profits. There is also the problem of automated trading.
Computers running algorithms see something that meets their parameters and they initiate automated buy and sell commands. This can magnify market swings until the trading houses get things under control. It’s also why there are automatic “Stops” in place. I was talking with a coworker and he wasn’t aware of them. I don’t recall the limits, but I think it’s 5% in either direction, then a stop kicks in and trading is halted for a while. This allows the markets to cool off a bit, reboot the computers if needed and make sure there is an actual reason for what’s happening. We didn’t hit those limits.
As to the reasons why the selloff occurred? Part of it was profit taking, part of it was the fear that the Federal Reserve was going to jack up interest rates. If interest rates are raised, it makes it more expensive to borrow money. (Duh) However, thanks to the new tax bill, a lot of companies are swimming in cash and are now bringing it back into the United States. They want to invest it, so they don’t need to borrow all that much money.
That fact tends to throw a big wrench into the Federal Reserves works. They see their role as “Guiding the economy.” In point of fact, the Fed, as they’re more commonly called, are generally responsible for some of the worst recessions as well as a major cause for the Great Depression. I’m not going into the constitutional issues of the very existence of the Federal Reserve Board, others have done that far better then I can.
All I will say is DON’T PANIC!! Yes the market is going down. However, it will go back up again. The Mostly Stupid Media may scream out “ALL THE GAINS FOR THE YEAR ARE GONE!!!!!”, but they won’t bother to mention that the “Year” is only a month old.
The Market may drop down to 20K or even a bit lower, but then the bargain hunters will move in. Many people forget the first rule of the successful investor. Buy low and sell high! For small investors such as myself? Just ignore what’s happening. Over the long term, as long as you don’t panic, you will do quite well. Just remember this:
Thatisall
~The Angry Webmaster~
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