Though the markets inexplicably rose on the first day of congressional gridlock in Washington, today a drop of 58.56 points on the Dow marks the beginnings of what could be a very long standoff.
Obviously, major drops in US markets and other financial markets tied to the economic well-being of the US will shrink your investments. What shutdown also does is prevent you from applying for small business loans, applying for Medicare and Social Security benefits (although people already enrolled will continue to receive benefits), and prevent you from visiting national parks, landmarks and monuments.
The next big battle is on October 17th, when the US runs out of money again. If nothing is done, then the US will default on its loans for the first time in history. Should this happen, financial darkness will fall.
8/22/13:
Today, another sign of just how vulnerable investment markets are appeared. The NASDAQ shut down for more than three hours, bringing many trades to a halt and hearkening back to the "flash crash" of May 2010, when the Dow fell nearly 1,000 points due to an incorrect shutdown of financial markets. Indeed, not all stocks were completely in lockdown. Some stocks, including Apple (AAPL) continued to trade, albeit in a limited fashion.
What went wrong? NASDAQ blames the outage on an inability for its electronic trading system ARCA to connect with the New York Stock Exchange. Basically, the Security Information Processor (SIP) of one place ostensibly failed to connect with the other, causing a standstill in trading information.
While the NASDAQ has failed in the past (it was brought down by squirrels in 1987 and 1994), standstills of any magnitude greatly worry retail investors, regular people who do not have access to high-speed trading algorithms or legions of expert traders. Failed stock exchanges are always worrisome, but it is important to remain calm and vigilant in the event of any mishap. When the next major freeze occurs, just remember that it isn't the first day the financial markets stood still.
4/23/13:
If you watched the Dow today, you most likely would have seen it suddenly tank a little after 1 pm. While momentum was regained and the Dow finished strong, why did the sinkhole occur?
The simple reason lies in one word: Twitter.
The Associated Press Twitter account was hacked into, allowing an unscrupulous person to post a picture of the White House burning, "reporting" explosions at the White House and injury ostensibly sustained by President Barack Obama.
While this issue was quickly rectified, it does reveal how powerful our interconnected world can be swung on pure mob mentality. The Dow lost 147 points in less than three minutes after the "report" came out on Twitter, briefly entering into the red before returning to a gain of 152 points to end the day.
Remember that most people trading in the stock market are, well, people. Even computer algorithms can be triggered by trading on a whim. We must realize that the market will be swayed by momentous events, but also retain a rational mindset to truly succeed.
4/15/13:
Today, on Monday, April 15th, 2013, two explosive devices were set off at the Boston Marathon, killing at least two people and injuring over 100 more. In terms of morality and of finance, this was a horrible tragedy.
Remember that finance is often tied to the mood of the nation. There are "American" investments, "Chinese" investments, "Chilean" investments, etc. When a nation is attacked, people tend to instinctively flee and move their assets somewhere else. As a result, the Dow dropped 266 points today to a dismal 14,559.
Does a tragedy always mean "sell, sell sell?" Not necessarily; the terrorist attack on the 1996 Atlanta Olympics, for example, did not make the market flinch. Part of the selloff was certainly driven today by investors worried about economic slowdowns in the US as well as Europe's continued entanglements.
Let this be an example of the need to stay up-to-date on current events. If it floods in China, what will happen to investments dependent on rice? If a hurricane rips through half of the US, what companies will be most active in rebuilding homes (or themselves)? If you always take some time to review current events, you'll have that much of an edge over Wall Street.
No comments:
Post a Comment