“Where in the World is This Thing Taking Me!?” – The Wild Ride of the “Shock-Market”

If you have been watching the markets these last few weeks, there is a strong possibility that you could be now suffering from Vertigo, or at the very least a mild nausea.

The volatility and dyslexic nature of the price movements (starting Monday, Aug 8th, the S&P500 was down 6.5%, up 4.7%, down 4.5%, up 4.6%, and up 0.5%), along with the historic rise in the price of gold (now at record highs over $1,800), illustrates the huge levels of anxiety and uncertainty that investors, still licking wounds from two years ago, are faced with.

This article is meant to serve as an explanation to what is happening with the markets, what is likely to happen in the near to middle term, and finally what investors should do about it. […]

Stop Saying the Stimulus Didn’t Work

The tag-line of many hard-line conservatives this year, as the economy continues to struggle, is that the stimulus package was a failure.  They say “the Democrats promised that this stimulus spending would bring the unemployment rate down to 8%.”  Since this did not come to pass, they say that it was “a colossal waste of money.”  While the democrats may be guilty of bad forecasting, to say that the stimulus did not work shows a complete lack of basic economic understanding.  You will also notice, if you pay attention, that none of these tag-line parroting hard-liners ever follow up this claim with what they feel would have been a better solution.

For those of you out there brave enough to take an economics course in college, and unfortunate enough to not have been able to sell back your textbook at the end of the semester, you can look back at a couple of equations that represent the most fundamental relationships for an economy.  The first is as follows: […]