Re: what made all the stock drop? How did they bring back up
I think it "sucks"!
It's been a week since you posted your message and the markets are still going down DOWN DDDDOOOWWWNNN
It's like your portfolio was at the top of a staircase and it fell. Now you see it tumble down the stairs and you can feel it hit the concrete as it tumbles down, step by step, ***doof***, ***doof***, ***doof***...
And the staircase is decorated in blood...
***doof***, ***doof***, ***doof***...
You can see your bank manager standing on the side with a whip in his hands, waiting to get hold of you...
***doof***, ***doof***, ***doof***...
"I need another beer" you think to yourself.
***doof***, ***doof***, ***doof***...
"I need another beer" you remind yourself.
And the worst is, the bottom is nowhere in sight.
"I need another beer"
***doof***, ***doof***, ***doof***, ***doof***, ***doof***, ***doof***...
I wonder what Benjamin Graham would be saying (and doing) now...?
Re: what made all the stock drop? How did they bring back up
There is an updside for some though. Whenever there are tough times, a select few prosper during this period, in this case it is those countries that never really rated that high in the overall scheme of things. I think this stock market crash will level the playing field again when the dust settles. Making the world a better place at the end of the day.
That's my opinion anyway..
It might be worth noting that playing the stock market closely resembles a trip to Monte Carlo or Las Vegas (allow legal gambling). That is, when you purchase a stock, bond or other basic investment that is not insured by the governement, say the way a savings account might be, you are betting your money that the value of that stock will go up and you will make a profit. No different than laying chips on the blackjack table and betting against the house or other players. When you bet on one companies stock by purchasing it, you are also betting against their competitors. Like the gambling establishment, you do this believing that the stock market game is not rigged or run in such a way that you will be cheated. You have confidence that you are being told the truth by a stock broker that your investment is relatively sound.
The seriousness with the problem today is that people no longer have confidence in financial institutions; this is evident in the daily volatility of world stock markets. Something similar with what happens when people no longer have confidence in government is unfolding (panic, fear etc.). Governments can only provide an illusion of security, giving people a sense they are addressing the crisis of confidence by acting as though they understand what is going on. In their mostly 'damage control' mode right now they believe bailing out the very industries responsible for this mess is the answer. This is their best guess! What they are really trying to do however is restore confidence in the system. You can bet that the misery index will go up in direct proportion to how confidence goes down.
In should also be noted that this mess began with the hocus-pocus of mortgage backed securities, originating with sub-prime loans to people who would never otherwise qualify for a loan, and all the magical thinking of great riches associated with this investment instrument. While individuals and groups all over the world bought into this Ponzi scheme by purchasing these securities (started in the US), they are not blameless. The same investment scheme was carried out in many other countries where dubious home mortages were collaterlized into the same type of investment securities. In Forrest Gump's terms, stupid is as stupid does. There is plenty of stupid to go around.
What to do: (IMO)
- Demand a reckoning from your politicians. Hold them accountable for being asleep at the regulatory switch that caused this train wreck. If your politicians don't understand that unregulated free market capitalism in an era of global inter-dependence is magical thinking, then replace them. There has to be ONE set of rules that every business in the world plays by, or the game can be rigged. This is going to mean the end of local sovereignty in some ways, but it is likely the price tag for globalization. I welcome the US learning this lesson!
- Understand how markets operate and learn to be a smarter investor. This includes not just personal investing, but reigning in your retirement fund managers and making sure they are not making stupid short sited investments with your money.
- Consider that what might have worked in the 20th century isn't going to work in the 21st century. We might actually be experiencing the death throws of the 20th century right now. We (humans) cannot continue to construct markets and carry out business that is at odds with the environment. This is not sustainable, humans will lose! We should look at making investments that are green in terms of sustainability, and forego trying to take shortcuts to greater riches that pit us against the environment.
- Don't lose confidence and give in to fear. We tell students not to be afraid of making mistakes, but to learn from them. We have made a really large mistake, but will get past this. Consider that a large part of the human race is now working collectively on the consequences of this mistake, and that has probably never happened in human history.