On Friday, the Dow Jones Industrial average fell more than 500 points, capping off the worst stock market week in years. Panic selling has taken hold of nearly every market in the world. As we digest today’s even worse massacre (?), consider: how much should you panic?
You should already be starting from at least a moderate level of baseline panic, because you have chosen to turn to Gawker.com for financial guidance, which hints strongly at larger problems in your life. Luckily for you, the fact is that we are at least as capable as most of the world’s media outlets to offer worthwhile predictions in a situation such as this, which is to say “not very.” What we can do, however, is to focus your generalized anxiety into finely honed point of panic without forcing you to watch CNBC, which really can be headache-inducing.
- Why all the worry? Last week was a rout in the US stock market, which has been on a strong seven-year bull run since the depths of the Great Recession. Seven years is roughly the average time between big market drops. After a run like that, there are few bargains to be had; everything has gotten a bit pricey; the market tends to be driven by hope more than by financial fundamentals; and the dumb money of Joe Average has piled in looking to join the profitable bandwagon. It all adds up to a situation in which investors are on edge, looking for any sign of cracks in this beautiful money statue we have erected on what is perhaps a shaky foundation. The US stock market, having fallen by 10%, has now officially entered a “correction.” If they happen to fall another ten percent we’ll be in a “recession,” or maybe just a “bear market,” but for now let’s look on the bright side and imagine that all of this represents just a slight return to sanity after years of good old American stupid overenthusiasm. However...
- What about China? Nowhere in the world has seen a more overheated stock market than China, where millions and millions of Joe Averages are taking their first real crack at the idea of getting rich quick through investing. The market, after a delirious rise, has now plunged more than 40% since June. This sort of sickening financial roller coaster ride is a fine welcome to the world of capitalism! The Chinese government has tried and failed to stop the falling market; China still appears to be locked in a full-on panic selloff. The good news is that many Chinese stocks had reached prices far out of proportion with reality, so this drop should bring them at least a little bit closer to rationality (though they’re not there yet). The bad news is that this isn’t just a case of mass psychosis that will soon pass—there are serious fundamental problems with the Chinese economy that could lead to an economic slowdown all over the world. This is all very complicated so let me explain it you like this: imagine China is a large country with many people, and they spend a lot of money buying stuff from all around the world, such as materials to build stuff in China, and then imagine that now China is going to be buying less of that stuff to build stuff, so all the places that sell them stuff are like “fuck,” especially less developed economies around the world that were depending on China as their lone meal ticket. Imagine that. Now open your eyes: it’s true.
- How does the bond market play into this? “Bond market. Liquidity. Emerging markets.” If anybody asks you about this, just repeat those three buzzwords over and over again. You can read more on this if you want but it’s the most boring possible manifestation of PANIC you could ever find. Suffice it to say the bond market is potentially just as fucked as the stock market but in a different way. Anyone who wants to discuss this more extensively than that is not a “fun” person to talk to. More importantly, though...
- How bad is this going to get? Well, the US markets just opened and the Dow immediately fell more than A THOUSAND FREAKING POINTS. This is legitimately the worst day since the end of the Great Recession!!!!!!!
- Is it going to get worse? The honest answer is “nobody knows.” The answer I, a member of the media with an interest in drama, would like to give you here, however, is: YES IT WILL GET WORSE. COUNT ON IT.
- What should I do with my money now? The honest answer is: “do nothing,” except maybe buy some things if prices go down far enough to make things cheap. The last thing you want to do is sell when prices drop drastically. But the answer that will likely occur to the many Joe Averages out there who were hoping to get rich quick and are instead faced with losing money now is: SELL EVERYTHING AS FAST AS POSSIBLE AND STUFF IT UNDER THE MATTRESS! When people do that, it just drives prices lower, increasing the drama and benefiting the media, of which I am a part. I therefore cannot not encourage you do this idiot thing in good conscience. And the most important question of all...
- Is it time to panic? The honest answer is: “panic is never your friend, and panicking can only make things worse, so let us hope that cooler heads prevail and this proves to be a rational financial correction to solid ground rather than the beginning of something very, very bad that reaches across the entire globe.” But don’t listen to us. We’re in this for the PANIC.