Financial Meltdown

We are hearing the 24/7 reports on the "crash" of the market, "financial meltdown", and a thousand other euphemisms used by the talking heads and their "experts". The real question is whether this is real or a product of the presidential election? As you might guess, I have an opinion on this.

The stock market has become bi-polar of late, wildly swinging from positive to negative in moments. Yesterday the Dow dropped around 400 points in the last hour of trading. The reason given was that GM was in trouble. Really? Was this some kind of epiphany the market collectively had at 3 p.m. and everyone sold, sold, sold? I really doubt it. Really what has been happening since our political heroes decided we were in a financial crisis is the market traders are trying to guess where the bottom is. Everyone is hoping to find that perfect moment to buy, locking in on exceptional bargains and therefore profits when the market responds. The problem is that the government has decided that they have the answer so they float a new idea every 14 seconds, trying to stimulate confidence in the markets and stop the free fall. What has really happened is that the politicians efforts have just the opposite effect. They are bi-polar therefore so is the market. The more they tinker the more erratic the stock market.

Before you think I am just beating a dead dog I will defend them. They are only doing what is being demanded of them. As a result of years of government manipulation of how our money is invested (i.e. 401-k's, IRA's etc) the average working American taxpayer has a stake in how the stock market does and has watched the evaporation of said investments. So they panic and the government panics. The problem is that our leaders don't know what they are doing because, if they did they would understand that we didn't get here overnight and it won't get fixed overnight.

Yes, I believe it will get worse before it gets better. Businesses will reevaluate their leveraged positions and come out stronger financially on the other side. Those that fail to recognize the necessary changes needed (are you listening Ford & GM?) will go away. That is unless the government props them up once again. It will take a while but the market will strengthen and stabilize and these memories will fade.