Markets Plunge…. Balderdash!

Don’t you just love the language used by the Associated Press and other news outlets when the stock market overall goes down some. “Plunge”…. “Crisis”…. “Dropped” …. “Tumbled”….. “Slide”….. . What a bunch of balderdash!!!

The article headline said the S&P was down 6%, the Dow Jones Industrial Average down 5.5%, and the Nasdaq composite down 5.8%. Take a minute to think about it. If something you wanted to buy went from $1.00 down to 94 cents, would you think the world was coming to an end? That’s down 6%.

Ya’all need a lesson in economics, not panic. Stocks are pieces of ownership in companies. Whether stock values go up or down has no impact on the companies themselves. They don’t get money from stock purchases or from stock sales. They just continue on doing business as usual and doing their best to maximize profits.

The value of a stock is supposed to reflect the net earnings of the underlying company. This is expressed as a price of a share of stock when compared to the earnings of the company and is commonly known as the P:E ratio. It is estimated that the current P:E ratio of the stocks in the Standard and Poor index is about 28:1. The overall estimated P:E Ratio for the entire United States Stock Market is about 22.25:1. The healthy P:E Ratio over a long period of years is more in the 18-21 range, so by this measure, the stock market is over valued and due for what is known as a “correction”.

Everyone needs to calm down. President Trump knows what he is doing. The United States of America has been the ATM Piggy Bank for the world for decades. It cannot continue on this course or the USA will, indeed, go bankrupt and go in default on its debt obligations. Trump is standing firm on making trade fair with “reciprocal” tariffs on countries with which we trade. Sound fair to me given there has been such an imbalance to date. Every country wants to sell in the USA but does not want the USA to sell in their home countries. Won’t work any longer.

And you hear that the price of products is going to go up. Maybe. But the market is already paying about the maximum price it will for a given item. So, other countries will absorb most of the tariff applied to it. If the price of something goes up, the United States consumer has the ultimate weapon: don’t buy the object offered. Period.

Over time, we will see more and more production of things being done in our country by our workers under our worker safety laws and under our environmental protection laws at wages that support families here and not in some foreign country. Don’t you want that?

So, again, calm down about the stock market. It will recover and your investments and 401(K)s will be just fine. It may take a bit of time.