The big drop in the stock market yesterday was unnerving for many people, further adding to their concerns regarding the future of the market and especially for the economy as a whole. Here’s what’s going on and what you can do about it.
Today’s sell-off was triggered by the government, the Fed, sending a signal indicating its inability to control or improve the economic picture. I see it as a bad idea, however, to focus on a single day or single event as it is really part of a much bigger picture, one that’s been going on for quite some time.
The bigger picture is a monumental tug of war between the huge, unresolved, real world problems our economy is facing and the self-serving “things are good” spin from the financial services industry and, until now, from our government.
Every day truth surfaces about the problems we are facing in areas as far reaching as unemployment, foreclosures, consumer spending, and the value of the dollar. Every day, the financial services industry and the government, aided and abetted by a majority of the financial media, send the message that things are about to get better. Bad news is spun to be good news. Saying it wasn’t that bad, so it’s good, that it’s always a good time to buy “for the long run”. We’re told the government will make things better when, in truth they show little competence and no likelihood of taking the actions that could help.
I’m reminded of the very same game they played with the housing market, telling everyone all the way through 2007, 2008, 2009 and 2010 that the housing market had bottomed. Only this past winter did they all finally wave the white flag and change their tune.
As with the housing market, spin can only work for so long, and what we’re now seeing is reality starting to play out in the stock market. We are facing huge unresolved economic problems that have been building for 15+ years and that our government cannot solve- problems with jobs, housing, burdensome government regulation and mountains of consumer, corporate, and government debt that must be wrung out, and painfully, in the real world. The same thing is true for the huge problems facing Europe. Economic stimulus, interest rate adjustments, and smoke and mirrors have run their course.
When a system is undergoing major change, what tends to happen first is destabilization, much like a top wobbling before it falls. The existing situation cannot continue on its current path forever with its wobbling, if you will, before it moves towards true correction.
This doesn’t mean that anyone should sit there wringing their hands in despair. News like we see today about the dramatic drop in the market should be taken as a reminder and a motivator to put your own financial house in order. There are answers and ways to save more money and protect the money you have. Start with www.MoneySmartOnline.com. It contains a lot of good advice and financial tools you can use. Your financial future is under your control. See to it that you make it a good one.
Also, here are a few of the articles I’ve written in the past that may be helpful as you set out to save more and protect your savings and investments.
The Rules of Spending Wisely: Financial Literacy Essentials (1 of 3)