September 1 2015 by Ellen Roseman
Another day of stock market losses around the world. Every commentator has a list of reasons why it’s happening. Can you believe them?
One day’s activity — up or down — may seem dramatic, but has little significance and foretells nothing.
Billions of shares of stocks are traded every day. Attributing the day’s results to any single factor is ridiculous. In fact, there are millions of factors and, therefore, no explanation.
The media treat the market going down like a passenger plane going down. A plunging stock market is not a tragedy. For the vast majority of investors, it’s an opportunity to buy stocks more cheaply.
Though “stocks going down” makes news, that doesn’t reflect broader reality. Look at historical trends. Over time, the equities market steadily goes up.
Felix Salmon’s articles at Fusion continue on a contrarian track. In a Aug. 24 piece, “Three cheers for the plunging stock market,” he emphasized that the economy is going to be fine even if the market goes down.
The stock market is NOT the economy. Instead, it’s a measure of wealth, showing how rich rich people are.
“If the rich are getting a little bit poorer, that’s fine. It means reduced inequality and an ever so slightly more level playing field for everybody else.”
Do you want to learn about investing? My nine-week course at University of Toronto starts Sept. 10. To sign up for the Thursday night sessions, go to Continuing Studies and search for Investing for Beginners.