When the Federal government bailed out Fannie Mae and Freddie Mac, the DOW soared 300 points and then plunged 300 points the next day. Lehman Brothers, a 158 year old company, filed for bankruptcy and the markets dropped 5% in one day. The inauguration of hope has resulted in enough supersonic barrel rolls to sicken the stomach of even the most hardened stock gambler.
What’s up with these wild swings and will it ever end? The answers are “Who knows?” and “Probably not.”
If you’re looking for comfort in the stock market, it’s probably not to be found. The turmoil could be here to stay. Let’s look at how stocks work. They are bought and sold based almost completely on their perceived value at any moment in time, as well as a buyer’s expectations of a price change. This perceived value can shift wildly day by day and even moment by moment because there is no underlying intrinsic value to them.
A stock is only worth what someone will pay for it and we humans are incredibly fickle animals. That’s why we like income properties at Empowered Investor Network. A house built from tangible assets, like commodities, standing on terra firma, qualifies as an actual investment in our book. The land is not going anywhere and, while there are local cycles of increase and decline, they are much more even in temperament.
Are there more companies selling on the various stock exchanges that could go belly up tomorrow? Almost certainly. Are you holding any of their stock? We sincerely hope not.
Flickr / Ana Patricia Almeida
