Again this last week has seen a big fall in share prices after a big rise. Thursday’s big drop was the result of a statement by the head of the US Central Bank who said that things are bad in the US economy, something that is painfully obvious with 40 million unemployed, with the Pandemic, with Sanctions, with Trade fights with China, and with Trump’s crazy divisive behaviour. It is surprising that share prices have all gone up the last few weeks and very but NO surprise that they fall a little! Life is not so easy under Trump if you are not wealthy – and that is a very big majority of the population! If you are poor then life is getting really bad because there is not much of a safety net when jobs disappear and when you fall ill.
Stock markets have had a habit of starting to recover well before the good news starts to improve corporate earnings. When money is cheap and plentiful it tends to move like big flocks of sheep in one direction or another when the sheepdog barks.
Their huge absolute size moves markets up and down until big speculators, like private equity investors, hedge funds and other super-rich investors the start to undo their investment positions to take advantage, as first movers, of flocks of sheep. The sheep end up without their wool and, in some cases as mutton on the dining table.
The explanations this week from the many “investment experts” was that “this was expected” or “this was an anticipated correction” – all meaningless words because none of them could have or did forecast this before last week!
Good investment advice is to invest over time and keep the portfolio spread out over several different types of companies.
The best investment is your own family and friends, your education or training over the whole of your whole life, and setting up your own company if you can.
But the “very very” best investment advise is never listen to investment experts – especially the ones dressed in suits with white shirts or blouses, and especially the ones who work for banks, investment funds or any government. They have not got a clue but they make nice money from telling you great stories.
Photo: Wikipedia Commons – Official White House portrait of President Donald J. Trump taken by Shealah Craighead on October 6, 2017 in Washington, D.C.