Stock Market Down, Underwear Sales Up
Last week Thursday Warren Buffet may well have seen a boost in his underwear profits. He is, besides being the second richest man in the world, also owner of the company that owns the popular Fruit of the Loom brand. Rest assured that, without a doubt, more than a few Wall Streeters soiled their undies but good when the stock market took a stomach wrenching, jaw dropping, and shit yielding 1,000 point plunge, all in a matter of about 11 minutes.
It's still up in the air as to what the actual cause was. There's a ton of speculation about fat fingers, a $1 billion dollar Proctor & Gamble trade, algorithmic selloffs, and beyond that there is no doubt that countless limit orders, stop loss orders, and other such orders also contributed to the massive tailspin drop because when all the prices were dumping their value, most of these pre-entered orders became effective. Most traders, including myself, keep limit orders open during the trading day to buy stocks at the day's anticipated lows, and sell at the day's anticipated highs.
What a sight, though. To watch the value of individual stocks, let-alone the entire value of your portfolio literally digest itself in a matter of minutes. It is a bit unnerving. Granted, the markets did indeed recover most of those losses, but Friday was fairly lousy too. The entire last week the markets shed over 629 points even without counting the 1,000 point decline.
This recent situation certainly may cause some smaller investors to again rethink the sensibility of trusting in the markets as a place to grow your life's savings and have something set aside for retirement. Certainly more than just Wall Streeters soiled their underwear that day, my own notwithstanding.
I say it may cause smaller investors to again rethink the sensibility of trusting in the markets because quite a lot of that trust was already whittled away at through the Great Recession which saw the markets lose nearly 50% at it's height. People are nervous. People are not just nervous about the markets, they're nervous about the people in the markets. Their nervous that people, not computers, that manipulation, not algorithms, are the cause of the woes of everything to do with finances and financial markets. They are nervous that there are deep rooted shenanigans at work here. And there will be some digging in to a few of those possibilities through Congressional hearings and the like—not that they'll likely produce much in the way of answers...do you really think Congress really understands the markets?
But nerves are more than understandable.
Still, I am 100% confident that we can all rest assured that the market is still a place to put one's money. Bad people and bad situations will always be a factor in the markets. And let's look at the big picture outside of the 1,000 point newsmaking event. Even with the trading error, the markets were not doing so well up until Thursday. It wasn't like the market had been rallying all week and then all of sudden...kaboom! We were down 200 points already before the 1,000 point plunge occurred on that day, and the whole week was riddled with unnerving news about Greece among myriad other factors. And don't forget, we had a scare in New York again, and while that wasn't talked about much as a factor in stock prices I'm positive that the heightened threat of a terror attack must weigh in somewhere.
We've had two failed terror attempts. Does this mean that the third time is a charm? Does the second attempt give pause to investors confidence? You better believe it does. And guaranteed a successful attack will have a major impact on the markets and the confidence of investors overall, and this has to be priced in somewhere as well.
The 1,000 point plunge was scary. It's also unusual. It's also something not likely to necessarily happen again. At least not any time soon.
Markets have ups and downs. That's how it has always been since markets were created. And that's the way it should be. That's the way I want it to be. In a lot of ways it's what makes the market itself. When we saw the Dow lose 50% of its value at the bottom that helped us all in some ways. The 629 point correction in the markets helps us all as well—again the 1,000 point drop discounted. It means that reality has been restored to the stock market. It means you really do have to pick good stocks and invest wisely unlike in the 90's when all you had to do was buy a stock to make money. Any stock. Forget brick and mortar. Forget profits. Forget fundamentals. Forget common sense.
What Thursday was, and frankly all of last week was, and what this entire recession has been is a reset of our mindset about the markets and about money. It is a buying opporunity. Stocks have been on sale, and stocks are still on sale and going on sale. They'll go up. And yes, they will go down again. And then up again.
It kind of makes me think of that drinking song, "I get knocked down, but I get up again. You're never going to keep me down." You have to be in it to win it. You have to stay on top of it to keep yourself above it. And you have to maintain throughout the entire experience a sense of respect for the reality, and have common sense about it all.
Although, that said...I'd like to do all this and still keep my current underwear. This anomaly isn't a lot to worry about. But it certainly was no joke either.