Aftershock
"We don't need to worry about a big reduction from here, but this correction could continue for the next couple months," said Shinichi Ichikawa, an equity strategist with Credit Suisse in Tokyo.
And yet investors are already rushing back into the US market based on the "soothing" words of Federal Reserve Chairman Ben Bernanke -- which is like entering Club Vampire on the soothing reassurances of its doorman.
How about these not so soothing comments: "The selloff in equities cannot be blamed wholly on China. This is case of the market flying too close to the sun, and the hot money collapsing," said Torben Krogh Nielsen, an analyst with Saxobank. "It's a correction that's been seven months coming." . . . "If there's a larger message behind all this, it's that the era of cheap money is over and you can't blame China for that," concurred David Karsboel, head of market strategy for Saxobank in Copenhagen, Denmark.
While analysts are trumpeting that investors should be comforted by the fact that yesterday's global plunge wasn't triggered by any specific financial, political or economic crisis, it's my opinion that this is exactly why investors shouldn't be comforted, and should, instead, be cautious and skeptical of analysts and marketers beseeching them (and their cash) to return to the fold.
There's usually a flicker or two from the light bulb before it burns out altogether. Remember the market crash in 2000? It didn't just happen for no reason, and it took over two years to recover from that one, but no one seems to be mentioning it anywhere -- and the signs are suspiciously similar: overheated economies, overvalued companies, stock hucksters everywhere. My last flight on Jet Blue, I sat in my row 1 seat, listening to the airline attendants casually chatting about their latest stock purchases. It sent chills down my spine, bringing to mind the famous quote by Joseph Kennedy: "You know it's time to sell when the shoe-shine boy tries to give you stock tips."
Loosely translated, that means that when your airline attendants are dishing about their portfolios, then the stock market is overrun with speculators -- and we've seen what speculators can do to a housing market.
If there had been a specific catalyst for yesterday's global stock market shakeup, such as the 9/11 attack, then we could genuinely search for solutions and makes moves to correct the damage. But yesterday was a free-floating reaction to indicators across the board -- continuing housing slump, check; mortgage lender meltdown, check; global jihad jitters, check; congressional bickering and bitch-slapping, check; growing nuclear attack and crazy despot concerns, check; uncertain political landscape, check; creeping socialism, check; protectionist rhetoric on the rise, check; unstable emerging economies, check; illegal immigration impotence, check; windfall tax rhetoric, check; splintering historical alliances, check; corruption among worldwide governmental authorities, check; unwillingness to acknowledge the manipulation of trading markets by billion dollar hedge funds, check . . . and the list goes on and on.
So, yes, it wasn't one single crisis that triggered February 27th's downward spiral, but that's precisely why there should be alarm bells going off -- because, in the absence of a crisis, Tuesday's market drop reveals just how nervous, skittish and ready to freak the average investor truly is in response to our uncertain global environment.
The concepts of solid financials and long-term investment aren't even on the radar -- instead, it's all about Flip This Stock.
For some reason, I don't find that knowledge particularly soothing, despite Ben Bernanke's words to the contrary.