What a crazy couple of weeks in stocks!

While I don't sweat my long-term/retirement/serious investments, what a crazy couple of weeks its been watching my "mad money" account. I didn't buy or sell anything, but what a roller coaster ride just watching stocks gain and lose 20% on any given day, and how most of the time, they seemed to go in the opposite direction of the Dow. In the end, it looks like they're at the same level they were 2 weeks ago, with a couple slightly higher.
Crazy!

i agree, i dont sweat em. in fact, i havent checked the balance in a single one of my personal accounts in months.

Yep, I don't sweat it, either. And I mainly don't sweat it by not looking! Why get depressed?

As a long term investor (which I'm currently not), I'd close my eyes to all of this volitility. All reports I've seen agree that this isn't likely to blow over any time soon. As the American consumer has been the backbone of this economy, I'm betting that stocks may not be the place to be in the short-term. How can the consumer keep spending at his/her current pace now that the ability to get ahold of cash is getting more difficult with each passing day? Here are the facts as I see them:

1. American wages have not kept pace with inflation (The starting union hourly wage for the global corporation that I work for has risen from $11.00 an hour in 1989 to $13.80 today - that's even with three strikes in between).

2. American's have a negative savings rate (a trend that started not long ago - the first time since the depression)

3. The non-mortgage debt held by the average American is astronomical.

4. Although the unemployment numbers have been good, the bulk of these jobs have been service industry and other lower paying positions (Walmart, etc).

5. Home values nationally are on the decline in most states (again, the first time since the depression I believe) decreasing the "wealth effect" feeling to the consumer.

6. Property taxes have doubled in the last five years.

7. The home equity ATM has dried up

8. The ability & cost of borrowing money has gotten more difficult & more expensive. (as an example, Well's Fargo bumped their jumbo loans from 6.8% to 8.0% last week)

9. Energy cost (gas, etc) increases are pulling heavily on the consumer

10. Health care costs have dramatically increased.

Some say that corporate profits are still showing good numbers so all is well, but wouldn't company profit's decline AFTER the last of these forementioned events worked their way into the marketplace.

I dont care what happens. if it goes up I win. If it crashes I throw more money in and I still win eventually

NOTE -- use of the word "you" means the "Royal 'you'", not you specifically, bjk7799.


1. American wages have not kept pace with inflation (The starting union hourly wage for the global corporation that I work for has risen from $11.00 an hour in 1989 to $13.80 today - that's even with three strikes in between). Union! SNORT! Base wages here in South Georgia are the state's minimum wage of $5.15. Lucky people get to start at $6.50 - oh boy! Rents are astronomical compared to such dismal wages. But from an economic standpoint, one can be very jaded about these things. It doesn't much matter that the poorest of Americans can't afford to buy things -- after all, the rich are getting richer, and they'll just spend more in place of poor people's spending! And it's not that the poor aren't spending at all -- what do you think is driving Walmart profits? -- and credit spending? Both of which are good for the economy.

2. Americans have a negative savings rate (a trend that started not long ago - the first time since the depression) Again, taking a jaded look, saving is anathema to a healthy economy -- we need people to SPEND SPEND SPEND, not hoard their money. Spending is what drives up profits for the companies you and I invest in, not saving.

3. The non-mortgage debt held by the average American is astronomical. Again, taking a jaded look, that's good. So long as they are making their minimum payments, the health of credit card companies and banks is assured. Since bankruptcy is harder, too, a lot of people are pretty much forced to continue paying their debts, even when they can't afford to.


4. Although the unemployment numbers have been good, the bulk of these jobs have been service industry and other lower paying positions (Walmart, etc). I agree that this is a huge problem. It's creating a United States that lives to service those with money, and doesn't produce anything. But not all service industries are low paying. The 19 year old girl who runs the only "day spa" in town just moved up to a fancy office, and added more treatments. She's raking it in, hand over fist -- and she didn't even go to college, just massage school!


5. Home values nationally are on the decline in most states (again, the first time since the depression I believe) decreasing the "wealth effect" feeling to the consumer. I'm of two minds about this. One, that I feel really bad for those people who lived in inflated markets (and they were inflated markets, let's bear that in mind -- home values aren't falling, they are correcting). The other is that I have to laugh uproariously. What, you ACTUALLY thought a five hundred square foot apartment was worth half a million dollars?!??! In what reality?!?!? Home values are on the rise in my part of the country, because we never had an insane run-up.

6. Property taxes have doubled in the last five years. Again, not for me. Only for those crazy people who stayed in overinflated markets, or who, like so many sheep, refuse to challenge their tax assessments.

7. The home equity ATM has dried up As it should have. People shouldn't use their homes as cash machines, unless they like paying forever on something they will never own. But again, for those of us who managed our home equity sensibly (that is, didn't touch it), we have it to tap into in case of a true emergency. And bringing back that jaded outlook, it's still a good thing -- people will be forced to do nothing with their home but PAY FOR IT, and they will build an investment that will serve them in the future. This is good.

8. The ability & cost of borrowing money has gotten more difficult & more expensive. (as an example, Well's Fargo bumped their jumbo loans from 6.8% to 8.0% last week) More expensive compared to what? We have enjoyed a decade of amazingly low rates -- rates that were NOT the norm! It's a principle of economics that once you give the people a benefit, they start to consider it a right. Our "right" to low rates disappeared and everyone is screaming that the Titanic is sinking. People will continue to borrow, because people will continue to have life events that require borrowing -- like, buying a car, buying a home, moving, opening a business, etc. What will disappear is frivolous borrowing, of the kind you sometimes see on this board -- "With rates this low, what do you guys think of me taking cash advances on my credit cards, and putting the cash in a CD?"

9. Energy cost (gas, etc) increases are pulling heavily on the consumer Couldn't agree more. Perhaps it will force us to get off the couch and start shaking fists at our congresspeople, urging them to find and fund alternative fuel sources? Yanno, if we had done this in the 70s, like Brazil did, we'd be totally off oil like Brazil is (for our cars, at least). As to homes, I'd LOVE to put in solar panels, if the cost could be brought down. But looking at it with a jaded eye again, energy sectors can only go up as profits go up, and that's good for investors in those sectors, right?

10. Health care costs have dramatically increased. You ain't woofin'!! This is the one thing that will destroy the middle class. Again, start shaking your fists at your congressperson, and urging action. But again, taking a jaded look, healthcare profits and drug profits are a huge driver of the American economy. After all, we'll probably take our needed pills, no matter what they cost, right?

Some say that corporate profits are still showing good numbers so all is well, but wouldn't company profit's decline AFTER the last of these forementioned events worked their way into the marketplace.
How? Are you going to stop heating your home in winter? Are you going to stop taking your pills? Are you going to stop driving your car to work? Are you going to stop borrowing when you have a significant life event? Are you going to protest your low wage by quitting? Are you going to stop paying your property taxes? No -- what you're going to do is move out of your overinflated housing market into a more reasonable one, where the taxes are lower, where the payment is lower even in spite of your having to get a mortgage with a higher interest rate, and even in spite of having to take a lower wage job (because the cost of living is so much lower in this place where there was no overinflated housing market). Eliminating that huge cost of living expense is going to make it easier for you to afford your medicines and your heating bill, and maybe even allow you to save and invest. At the same time, you'll be so angry at having to leave that wonderful big city, where you felt rich because your condo was "worth" half a million, that you'll write your congressperson incessantly, and thus you'll push him or her to action.

(Or you'll stay put and complain and whine, allowing your debts to pile up, get your home sold for tax debt, or foreclosed upon, then end up as a greeter as Walmart, while your kids stop coming to visit because you "ruined their inheritance".)

All of this is not to say that I'm not concerned about these things. All of these things affect the individual much more than they affect the economy. But I'm not of a panic mindset, thinking that it spells the End of the World As We Know It. Human beings will evolve, or they will perish. The person in financial straits over living in an overinflated market with high taxes will move, or they will lose it all. The person with too low a wage will move to a better location, get a better education, and/or will get a second or third job -- or they will lose it all by choosing to whine and complain and do nothing.

((The only real concern is the person with healthcare bills -- since they can't bankrupt on that debt now, and they must have healthcare. Of all the things on this long and rather comprehensive list, this is the only entry that really should perk up our ears, and make us act.))

just wait when people realizes that most chinese stocks are over-valued - some claim a massive chinese sellout would happen after olympics ... kinna scary

I am to the stock market as a typical, American 8-year old kid is to movies and video games, desensitized. I watch very closely, but as a survivor of the ’00 Tech Crash, I am generally unfazed by short-term movement.



I still have my peak earning years and 30 more years of savings and investments ahead of me.