The sky is falling! Or not…

So how much did you lose yesterday?  Unless you’ve been in a cave with Osama bin Laden you are likely aware that the markets had a slight “correction” yesterday.  How slight is yet to be seen.  In a nutshell the markets lost most of their gains since last November in about 15 minutes. 

Now, I’m certain that those of you who are more financially savy than I am will be quick to point out that I am not seeing the whole picture – and quite frankly, I really don’t.  But I think it is safe to say that lots of people lost lots of money yesterday.

I am perplexed by the madness that seems to overcome normally intelligent beings and sends them panicked over a cliff every once in a while.  I remember vividly visiting my company’s investment department on that black day in 1987 when the markets took an unexpected plunge.  Our chief investment officer came out of her office holding a cup of coffee which rattled against the side of its saucer because her hands were shaking so badly.

She was on her way up to inform our CEO from hell just how much less value the company had.  Right there I had an epiphany.  Stock markets are evil.

However, that said, equities are a lot like heroin, insidious but we are addicted to them.  They underpin our retirement funds, spit out dividend cheques and drive the health of our economy.  My main concern today is that the only thing that our industries seem to be concerned with making are profits for stockholders.  And not just reasonable profits, but unrelenting continuous quarterly gains that – for a number of well managed companies – are impossible to sustain.

The net result of this are mindless mergers, massive layoffs and searching constantly for the cheapest supply of offshore labour.  Side effects also include cooked books and spectacular failures such as Enron.  The quest for increasing quarterly profits also focuses many businesses on the short term and only creating value quarter to quarter.

Then every few years we have a “correction” in an overheated market and people are brutally reminded how fragile our entire economic system is.  And how out of our control it is.  This latest one started in China which has been one of the fastest growing economies in recent history.

This morning many will brag about how much wealth they lost yesterday.  Today, I don’t feel any poorer than I did yesterday.  I might if I looked at my portfolio, but I am not that concerned.  Hopefully, the managers who run my investment funds were busy picking up bargains for the long term.

However, this morning might be a good time for all of us who are addicted to the stock market to reassess what is important to us – creating value or creating quality goods, services and jobs.  That is the gain from looking to the long term.

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