The Sky is Falling! (or at least the market is down)

I keep telling myself I am going to lay off the political posts for a little while, but I keep reading things that bother me. I consider myself a conservative, but often when I read newsreports, opinion, and facebook statuses from other conservatives, I scratch my head wondering, “When did being a conservative mean you quit using critical thinking skills?” I am sure many of my friends think the same thing about me, so please don’t take that last statement personal. Several years ago realized I don’t think like a lot of other conservatives, and that’s ok. It hasn’t always been easy, but it has been interesting. I am very comfortable in my own skin. But I still scratch my head in amazement, saying to myself: Why can’t other people see what I see? Maybe I am the one that is naive.

What has caused me to scratch my head recently is what people are saying about how the market plumeted the day after the election. Did that really surprise anyone? Is it really Obama’s fault? Well…not entirely.

It is unfair and inadequate to compare the stock market on Wednesday November 7th with the numbers on Tuesday November 6th. A better and more fair comparison would be today (or November 6th), compared to January, 2009 when Obama first took office. Since January, 2009, the Dow Jones Industrial Average is up 70%, the Standard & Poor’s 500 index is up 81%, and the NASDAQ composite index (heavy with tech stocks) is up 119%. If you solely blame Obama for the drop this past week, then you have to soley give him the credit for the growth since 2009. In my opinion, he does not deserve all the blame and he doesn’t derserve all the credit. (The key word is “all.”)

So, what happened on Wednesday?

Since the beginning of this year our economic recovering has slowed down because people with the means to invest, create jobs, and hire people started holding on to their money, waiting to see what would happen with the election. These entrepeneurs, were cautiously optimistic that Romney would win. If Romney would have won, they would have flooded the market with new money. As a result, we would have seen just a dramatic rise in the market on Wednesday as we saw a dramatic fall. But the rise, as well as this fall, would have been temporary. Over time, things would have leveled out, just like they will level out from the plummet.

The immediate drop Wednesday was reactionary, just as the immediate rise would have been reactionary if Romney would have won. You cannot judge the market by a temporary emotional response. The simple truth is, immediate turns in the market (up or down) are manipulated by those with the resources to affect the temporary change. In other words, the 1% we hear so much about. If you follow the market (and I don’t) you watch for trends, not fads.

(Now, before you get upset with me, I am not mad or envious with the 1%. I am a capitalist. I believe people should be free to make as much money as they would like and I believe we have to be careful not to “punish” success with excessive taxation. Our country is most healthy when entrepreneurs and philanthropists are investing and generous.  However, this 1% is part of the “power elite” in our country, and they do affect things for good or bad.)

The majority of people in the 1%, who were holding on to their money until after the election, are upset that Obama won. They are in their highrises licking their wounds. Eventually they will come to terms with what happened and will figure out a way to make money, inspite of the things they are afraid Obama is going to do. They will not sit on their money for four more years. Between now and the end of the year, both sides will reach a compromise about the Bush tax cuts, or extend them for another six months and deal with them in the Spring. The 1% will start investing again. The market will turn around and I predict that the numbers on November 5, 2013 will be higher than they were on the day before the election, November 5, 2012. The numbers may not be as high as they would have been under Romney, but that is just total speculation.

But then again, I could be the one that is naive. After all, there is a reason I am not in the 1%.

So, once again I implore you, please stop all the gloom and doom and pray for our President and country.


4 thoughts on “The Sky is Falling! (or at least the market is down)

  1. Good analysis, and I agree with your assessment about the immediate downturn. The market is not the greatest indicator of the strength or weakness of the economy, especially on the short term, as you mentioned. For example, some companies whose stocks have risen since 2009 made money with foreign business and investments, despite the US economic situation. Others have been bolstered by the stimulus money (our tax dollars) that has increased the deficit, and national debt. This is false prosperity because it is a redistribution of wealth, not a creation of wealth. The best indicators of financial health are employment, the debt / GNP ratio, consumer confidence, and business investments. These are all stagnant or worse since 2009. They are very hard to turn around when the only means to correct them is more taxation and government spending.

  2. Good article. I totally agree with you. One day dips or increases have very little to do with facts and almost everything to do with emotion. I also agree with your sentiments about a third party. I really think it is time to do away the two parties we have and create parties with stated and detailed philosophies and approaches to the country’s problems. Parties that would just be honest with us. Maybe you are not the only one naive. Just saying. LOL

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