What Did We Just See?

A 510+ drop in the DOW took place on 8/4/2011. Additionally we saw almost all other major markets take similar dives, percentage wise (approximately 4 – 5%). Another commentary was that we gave back all the gains that we have made in 2011 in just one day. Lastly, over the past week or so we’ve lost a combined 10% off the DOW.

All I have to say is look at what happened over the last two years. We’ve seen much more worrisome roller-coaster rides. Let’s not forget that the DOW has dipped below 7k in March of 2009. Let me say that again, in March of 2009 the DOW was below $7,000. We’re currently over 11k even after this tremendous drop.

I’m not going to freak out just yet. As with a lot of economic news it’s almost better to have things happen dramatically than over a long period of time. We may be down 500k+ yesterday and even have a few more down days but I believe that this is the time when investor hawks will actually buy into the market thinking that they can pick up a stock at a discounted price.

Did any of the companies go out of business yesterday? Did Microsoft go bankrupt? Did Sirius’s satellite fall out of the sky? Did Home Depot lock it’s front doors or Sears stop selling dishwashers? No. Call it a correction. Call it a fear. Call it a million things but certainly do not call it the demise of the stock market.

I think it’s good that the country gets a wake-up call like this every now and then. It gets people to ask questions that they don’t want to be bothered with on a normal day. They get to see what politics can do to the economy. More importantly it shows you who knows what they’re doing in the market and who might be a reactionary / scared investor. If people sold everything when the market dropped below 7k and no one ever bought back; then how did we get back up to where we are over 11k now? Sure there will always be casualties and I hope no one gets caught in those cross-hairs.

I can give you two examples of investments that I’ve made. I’m a huge Howard Stern fan and more importantly hater of regular “terrestrial” radio. Even without Howard, I’d still keep my Sirius because I love it so much more than the commercial crammed and same 5 song loops that “terrestrial” radio spits out. I, almost on a whim, bought shares of Sirius when it was down to around .20 cents. Even when it dropped to about .5, sure I was scared but knew there was value there. Now it’s at $2. I only wish that I had the balls to drop a ton more money into that stock at 5 cents. Conversely, I thought with all this government takeover and stimulus that Fannie Mae was another stock that had taken a beating but would bounce back. Clearly I didn’t do my research enough on this one and now I’m stuck with a stock that I bought at $20 or $30 (I’m so disgusted I can’t even remember but I know it was double digit dollars) and now it’s basically off market and worth 50 cents.

You win some, you loose some. But you’ll never know until you put your money down. You just hope to win a little more than you loose.

But let’s be real. It’s legalized gambling and what’s worse it’s an inside gambling. If you’re telling me that Martha Stewart is the only person who bought or sold a stock based on a tip from someone “in the know” than you’re fooling yourself. It’s a scam but it’s a proven scam that you’re money will increase over the long term better than many other investments. If you’re looking for quick money then you take on a much higher amount of risk.

What can we take away from this news and the upcoming employment news? I’d say not much. We know it’s going to be bad. But as you’ll see in my next post, it’s mainly political. Don’t sell off your portfolio yet. In fact if there was a stock you’ve been watching and the price has come down, you might want to jump on it. Be calm. Let’s see what the next few days bring us. Let’s looking into the numbers, instead of reacting too the numbers. More importantly let’s look into the politics of what’s happening here in the USA and around the world.