By the end of last Friday, the Dow Industrial dropped 400 points and the market is now down cumulative 8% in 15 days of the new year! Oil teeters at $28 and it looks to me that it is inclined to slide down, not climb up. Just as expected by some, and say it with me, please, "It's only going to get worth!"
But people (again) are like, "Oh, my God! My Apple stock! I should've sold at $139!" (FYI, it's at $97 as of Friday). And the media is all like, "Market crash robs $2.3 trillion from investors!"
Seriously? It's the market's fault??? Hello, people, can't you read?! They state it plain and simple on every trading site and in every market investment document: "May lose principal value." It's in smallish, but not invisible, print - if you care to see it, you will. How can anybody possibly blame the stock market for being what it's meant to be: the gambling boiler fueled by unsubstantiated rumors, false promises, illogical hopes of overnight wealth, and herd mentality? The chances of losing all your money there are pretty much the same as those in pressing the slot machine's button for days and days in a row.
In fact, casinos are far more honest about it - when you walk in, you know that the odds of setting yourself for life by winning there are very low. And nobody blames the casino. You blame the Fortune. The reality is that the stock market is not much different.
The only people who manage to generate gains there are the most shrewd, the most intuitive, the luckiest, and, most importantly, active traders; those who understand the slightest nuances of the market's moves; who sit in front of their computers for 8 hours a day and follow their gut feelings when they personally manage their portfolios. But those are one in a million. The rest of the "investors" - from an average Joe to large pension funds are bound to lose. Remember all those brokers and fund managers who handed over their investors' money to Bernie Madoff? You don't expect them to start actively trading for you, do you?
And let's not forget the simple arithmetic fact that it is the mass public participation in the security exchange that drives the market value up and down in the first place. We've already discussed the supply and demand laws on multiple occasions. The more people buy the stocks, the higher their prices are. And it's the mass panic that results in selloffs and crashes.
Even if you don't understand the detailed dynamics of what happened on Friday, you can grasp the essence of the participation impact in the perfect example of Apple shares: There were tons of companies that lost far more than Apple's 2.4% of their stock prices (Disney, for example, lost 5.3%), yet it was Apple that led the list of "wealth destroyers" (as some media geniuses labeled them) with a loss of $218 billion (26%) of their market value. The reason for that is the astounding number the company's outstanding shares. Everyone and their mother chooses Apple as their favorite high-tech investment.
So, it's not an abstract "market's" fault; it's the investors' own undoing. Nobody forced them to trust their pension and college funds to a gambling outfit. And now, between the mass hysteria of people in fear of losing their last dime and the financial strains caused by the economic downturn, the selloff will accelerate. 400 points is nothing - there is a real crash ahead.
