Actually it occurs to me that if you are investing for long term and can afford to wait it out this would be an excellent time to invest in the stock market. There's a huge panic mentality going on and people are fleeing it in droves, depressing prices across the market. With a little research it shouldn't be hard to find companies out there that are fundamentally sound that will make it through the bad times of the next few years. Because the economy is cyclical and bad times really don't last forever and I think that eventually we'll make it through, optimist that I am.
I could be completely off-base because I'm certainly not deeply versed in the subject though I have been doing some reading. I have a working hypothesis about the size of this whole economic problem and that it's a function of the Information Revolution. The ease of communication has allowed an an enormous concentration of capital sloshing around the globe in what's become a very small market. The people managing this are chasing the highest returns for this huge lump of capital. Being people, they tend to chase in the same direction - herd mentality, you know.
Because this lump of capital is so big, it distorts any sector it lands in. Rather the way global warming is causing more "extreme weather." It excites the system because it adds more energy to that chaotic system. The money managers have no idea how to handle these feedback loops. It's too new and the economy, like the weather, is too chaotic a system to be fully understood. Throw deregulation on top of that, allowing that huge lump of capital to slosh where it will and you're going to get the natural boom-and-bust cycles of the economy - magnified. (Drat, I don't know if that was very lucid. But I don't feel like taking it apart and rewriting it so I'll just have to hope you can pick out the sense in it.)
All of which comes 'round to saying that I think this is a cyclical downturn and eventually there will be a cyclical upturn. If you can wait it out long enough, there are probably some real bargains out there - stocks, like houses were overvalued during the bubble, now they're likely undervalued. People need places to live and they need what a lot of companies sell. The market will eventually (and I do stress eventually) rebound.
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Date: 2008-10-09 05:09 pm (UTC)I could be completely off-base because I'm certainly not deeply versed in the subject though I have been doing some reading. I have a working hypothesis about the size of this whole economic problem and that it's a function of the Information Revolution. The ease of communication has allowed an an enormous concentration of capital sloshing around the globe in what's become a very small market. The people managing this are chasing the highest returns for this huge lump of capital. Being people, they tend to chase in the same direction - herd mentality, you know.
Because this lump of capital is so big, it distorts any sector it lands in. Rather the way global warming is causing more "extreme weather." It excites the system because it adds more energy to that chaotic system. The money managers have no idea how to handle these feedback loops. It's too new and the economy, like the weather, is too chaotic a system to be fully understood. Throw deregulation on top of that, allowing that huge lump of capital to slosh where it will and you're going to get the natural boom-and-bust cycles of the economy - magnified.
(Drat, I don't know if that was very lucid. But I don't feel like taking it apart and rewriting it so I'll just have to hope you can pick out the sense in it.)
All of which comes 'round to saying that I think this is a cyclical downturn and eventually there will be a cyclical upturn. If you can wait it out long enough, there are probably some real bargains out there - stocks, like houses were overvalued during the bubble, now they're likely undervalued. People need places to live and they need what a lot of companies sell. The market will eventually (and I do stress eventually) rebound.