The Truth About Stocks and Bonds

After all, what is 9000? It's just a number. It's just billions and trillions of dollars. It's just the savings and investments of millions of Americans and others around the world. Just because we've fallen below 9000 that doesn't mean the sun won't shine as bright nor that the flowers won't smell as sweet. There'll still be a tomorrow, and someday this all will pass.

There. Now that I've reassured the markets perhaps we can all stop worrying.

Let's look rationally at this situation, shall we? As I see it, the problem with the markets is that for the first time in a long time, many Americans are coming face to face with this thing called risk. Many of us thought we knew what risk was, but we didn't really know. You see, real risk is not a concept or something you can analyze or intellectualize - real risk is an emotion. When you're walking through the jungle and you find a tiger in your path, you don't get out your IPhone and look up "tiger" in Wikipedia, researching and analyzing it's potential danger. When you see a tiger you feel the risk, without thinking, and you react. You go "waaahhhh!!!" and you run for your life.

That's what's happening in the markets right now. There's a tiger out there lurking, and we have all these Wall Street people frantically trying to analyze and rationalize what's going on, all the while ignoring the gnawing sense of risk growling in the pits of investor's stomachs. We see the technicians looking at their charts and saying "this isn't supposed to happen" while the tiger chews another leg off. We see the fundamentalists proclaiming "this is an excellent opportunity for us to be eating the tiger instead of the tiger eating us" while a claw rips open their bellies and tears at their insides. It's a sad and horrible thing to watch.

So, what does history teach us about situations such as these? If we let history be our guide then there are two ways to look at this. First of all, pretend this is a baseball game and not a stock market. The bulls would look at Jones, who is 0 for his last 30 at bats, and say that history would teach us that Jones is "overdue to get a hit.", while the bears would look at Jones and say history would teach us that "there must be something wrong with Jones. He should be on the injured reserve." In other words, history teaches us nothing. Forget history - you'll never make any money that way.

Instead of looking to the past, ask yourself this question instead: "Do I know what the hell is going on with these markets?" If the answer is yes, then would you please drop me a note because I'm dying to know. If the answer is no, then may I ask you why are you investing when you don't know what the hell is going on? Did you all of a sudden become a Warren Buffett or a Nostradamus or something? To my mind there are only two kinds of people who should be in the market at this particular time - lucky traders and dumb investors. Warren Buffett is neither, but then he's investing at a whole different level.

My point, though, is that there are worse things you can do with your money right now than just sit and wait for the dust to settle. I don't mean wait till hell freezes over, but just wait until we all get some idea what's going on. Every day it seems like some new government program or initiative is announced, and every day it seems like some new sector of the economy is in trouble. Wait a while, put your money in the bank, and see if any of what's going on makes any sense. I know the stock brokerages hate that, they tell you to buy while it's cheap (meanwhile the market drops another 3%), but in this present environment patience is truly a virtue.

As to why the markets are in a freefall, my theory is that the last debate is to blame. I don't know if anyone watched that (or managed to stay awake past the first 10 minutes), but could we have 2 candidates more clueless about what's going on in the country today. For weeks now the headlines have all been about the doom and gloom on Wall Street, and these guys sit around and argue about which of them is really going to cut taxes. Personally, I don't think either one of them showed any capacity for seizing the day and leading us out of our financial malaise, but who knows.

Anyway, after that sorry debate I don't think it's any surprise that the markets showed their vote of no-confidence by sinking down even further. That loud thud we've been hearing all week is just Wall Street's way of saying "if we've got to depend on any of these guys getting us out of this mess, then we're in trouble." If we are at a turning point with no clear direction in sight, then you could do a whole lot worse than just sit on the sidelines for a while and wait this thing out.

That's my best investing advice other than (1) if you have a job, make sure you (2) keep your job. Go into work today and tell the boss "say, have I ever told you how smart and good-looking you are?" Believe me, a steady job and cash in the bank is the best investment you can have when times get tough.

If you don't have a job, then, well, I don't know. Maybe you can sell jewelry down by the train station or open a hot dog stand or something. If nothing else you can always become involved in radical fringe politics. That's what a lot of people do when the economy sours. Become an anarchist, or a socialist, or an antidisestablishmentarianist or something. Walk down the sidewalk passing out anti-authoritarian pamphlets and petitioning the disenfranchised to join your movement. Become the next Lee Harvey Oswald and make your mother proud.

Or, maybe, just wait this thing out and do the best you can.