If you'd asked me last week where the Dow Jones was, I probably couldn't have told you. Though I do hear rough ups and downs most weekdays on Marketplace on NPR. It's not that I don't care -- we do have retirement investments and as of a few weeks ago, they were in "good shape". But... China.
China is not a free market and its stock market is still young. It is currently going under some sort of an implosion and currency devaluation. And nobody seems to know what it means. The global stock markets -- which are based on gut feelings, rumor and computer models which are based on gut feelings and rumors -- are naturally skittish. Today's trading took the Dow Jones on an initial 1100 point drop, but they got over that.
From Tuesday 18 August 2015 09:30 to Monday 24 August 2015 16:30, the Dow Jones has gone from 17537.30 to 15,871.35 -- a cratering of 1665.95. 9.5%.
Source: Google Finance - Yahoo Finance - MSN Money
Perspective: First, remember that the Dow Jones is still nearly 16,000. Second, the great stock market crash of the Great Depression? It's total value was less than the current collapse. But at 9.5%, this decline is very much smaller than the old decline. The 1929 crash affected a lot of people because a lot of people had been lured into putting their money in the stock market. That doesn't quite work that way today -- save for retirement funds -- except in China, where they were trying to find a safe place to put their money in their pseudo economy. Right. Nothing can go wrong in the stock market.
I was in grad school during the big crash of 1987 -- Black Monday -- the Dow Jones Industrial Average (DJIA) fell exactly 508 points to 1,738.74 (-22.61%). I was in the middle of debugging a FORTRAN program and had defended but not revised my MS thesis and working on my Ph.D. research. I couldn't get a teaching job without the graduate degrees, and they were off for quite a while, so there wasn't anything I could do. I went back to debugging the program. If the U.S. was about to plunge into a Super Depression and we were all out of jobs, so be it.
Today's 588.40 loss? Just not a big deal when you're starting from a value over seven times as much as 1987.
So everyone take a deep breath and let some things sort themselves out. And maybe China could figure out how to run an economy. Or, as in some other big drops in recent years, no one outside of Wall Street will care all that much in the short term. Marketplace points out the U.S. economy only exports about 1-2% to China, though we use China for a lot of manufacturing.
And if you have money, you're no doubt buying.
Oh, and oil is now down to below $39/bbl -- first time in six years.
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