The U.S. stock markets are down almost 5%. Is the world falling apart? Well, we are halfway to a technical correction (down 10%) and may be facing a genuine bear market (down 20%). Does that mean we should be scared?
I don't know of any investment analyst who doesn't think that corrections or bear markets are good for stock markets in the long run. But, it is like taking medicine. It is no fun and causes investors to lose sleep! It causes capital to flow from over-valued stocks to under-valued stocks. This is called "back-filling" and actually makes the long-term trend stronger.
And, never forget the sage advice of Warren Buffet who paraphrased "I don't know where the market will be tomorrow, but I do know where it will be in ten years -- UP."
Don't confuse normal corrections with systemic collapses. We are steeped in the sudden drama of "the crash of 1929" and actually experienced the slow-motion-train-wreck of 2008/9. We are hyper-sensitive to investment drama!
This half-correction is largely a result of China's economic ignorance and the resulting collapse of oil prices, which hurts the U.S. oil industry badly. This half-correction is a routine economic event, not a systemic collapse. When you see a few hedge funds suddenly go out of business or when you see a few banks suddenly fail, there may be a systemic collapse approaching, and you can get scared. Until then, take your medicine and embrace the correction. It's good for you!
It could be worse . . . your mother could make you swallow a spoonful of Castor Oil!
I don't know of any investment analyst who doesn't think that corrections or bear markets are good for stock markets in the long run. But, it is like taking medicine. It is no fun and causes investors to lose sleep! It causes capital to flow from over-valued stocks to under-valued stocks. This is called "back-filling" and actually makes the long-term trend stronger.
And, never forget the sage advice of Warren Buffet who paraphrased "I don't know where the market will be tomorrow, but I do know where it will be in ten years -- UP."
Don't confuse normal corrections with systemic collapses. We are steeped in the sudden drama of "the crash of 1929" and actually experienced the slow-motion-train-wreck of 2008/9. We are hyper-sensitive to investment drama!
This half-correction is largely a result of China's economic ignorance and the resulting collapse of oil prices, which hurts the U.S. oil industry badly. This half-correction is a routine economic event, not a systemic collapse. When you see a few hedge funds suddenly go out of business or when you see a few banks suddenly fail, there may be a systemic collapse approaching, and you can get scared. Until then, take your medicine and embrace the correction. It's good for you!
It could be worse . . . your mother could make you swallow a spoonful of Castor Oil!
