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August 31, 2013

Scary Things About the Stock Market #1

Obviously the Stock Market is the eventual end point for most workers’ investments, retirement or otherwise. Your financial advisor is going to tell you that, historically speaking, it’s the most stable thing out there. Consequently, it’s where s/he’s going to place your bets. If you’re investing via a company 401(k) then you’re limited to a few check boxes, all of which are either outright stocks or mutual funds composed of them. And when you hear about people “getting into something”, it’s almost invariably a reference to buying that company’s stock. In future blogs I hope to discuss the historical validity of the stock market, as well as why it’s the favored choice for financial advisors. Today, though, we’re going to focus on a single question. Ready? Is the international community getting its act together with a functional political system that ends wars, economic depressions, and other important issues? Or is everything just getting crazier? Now I’m not talking about the “we’re-out-of-coffee” kind of crazy, (although in my house that falls somewhere between nuclear devastation and a meteor crash). Rather I’m talking about how every single day the major news outlets are once again reporting that the international community is on the brink. This could be due to the war in Syria/Egypt/Africa, or the teetering European/Venezuelan/American economy, or it could just be the biggest natural disaster ever in the form of an earthquake/forest fire/tsunami. Whatever the case may be, you can always count on one sure fire response to any of the above scenarios: the stock market falls. Bloomberg is reporting that with the recent unrest in Syria, the S&P 500 is heading for its worst month since May 2012. Apparently investors are not calmed by America’s authoritative response to the situation. But even if America’s response was whatever could be defined as perfect, the mere threat of war anywhere near large reservoirs of our soon-to-be-gasoline will always spark financial fallout.  And this is not a situation that is going to resolve itself anytime soon. The merry go round of the Middle East seems destined to be in a constant state of turmoil. And now that we have expounded on that question, let’s ask another one. Why would anybody want their retirement security to be dependent upon investor confidence in the international situation? If you’re focused heavily on the stock market, then that’s a question that unfortunately won’t let you take your time in giving an answer.

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