Opinion: Sky Not Falling, Just Dow

You would think, from reading bulletins about the stock market's drop today--about how the Dow Jones decline rate mimics the Great Depression--that Western civilization was on the brink of extinction. To someone who hasn't bought stock or mutual funds (securities of any kind, for that matter) for at least a decade, this doesn't make sense. The closely followed Dow is an average of the prices of thirty stodgy, old-line industrial companies (out of tens of thousands of publicly traded enterprises). An artificial indicator like that is bound to fluctuate, and consider this: No one is forcing anyone at gunpoint to buy or sell anything; for every seller, there's a willing buyer. The Market goes up, the Market goes down. Don't let it get in your head.

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By Ronald in News on March 2, 2009 3:00 PM

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ronaldholden

No, I'm saying that the Dow is a window into a tiny segment of the stock market, and that the stock market is only a tiny window into the American economy. An indicator, for what little it's worth, that is now back where it was ten years ago. IT HAS NOTHING TO DO WITH YOUR PERSONAL WEALTH, unless, of course, you sell assets for less than you paid. My point is: don't sell undervalued assets in order to buy overvalued assets. Ideally, don't sell anything. Remember, if someone is buying what you're selling, the purchaser knows something you don't. Keep your head when everyone else is in an irrational panic. It's NOT the end of the world.

jdavin

Uh so if I read this right you're saying don't worry about the Dow drop because it's an unrepresentative index. Well duh, the Dow is dumb and the media is dumber for continuing to quote it. But that's not the point - the S&P and other large indexes also dropped 4 to 5% and even more than that in the past month.

To your point that someone who hasn't bought stocks or mutual funds doesn't need to worry about the market's performance - well, the market indices are just a reflection of the broader economy. They're going down because of all the bad news we're learning, like unemployment increasing, GDP dropping, further home price declines, bank nationalization, etc etc.

So if your livelihood depends at all on a job, consumer spending, or government benefits, it doesn't do much good for one to stick their head in the sand.