I see in my "breaking news" emails from the last few days that there's another one of those huge drops in the stock market. This time it's over 300 points and of course, everybody and their brother is claiming that it's because of the downward slide of the economy.
The problem is that they're only half right about this. The reason for this big drop in the stock market is that lots of investors have heard lots of news, mostly bad, about the so-called recession that they keep saying is coming. I am not a hamster, it's obvious that after hearing enough of this news and dire predictions that a lot of investors are going to see their summer plans to spend a month at a Branson private golf course go up in smoke.... and thus they sell their stock in an effort to cash in before the price drops far enough that they'll end up losing money.
Those that do this early usually end up making a profit.. others manage to keep from losing money and everybody else loses varying amounts of their financial shirts.
Once again its got very little to do with what is happening in the economy before they sell and a LOT to do with what people are saying and forecasting. If enough people act on the financial forecast then it becomes a foregone conclusion.
If I say that there is a severe shortage of golf balls and that the golf industry is facing serious trouble because manufacturers cannot supply enough balls for the demand.... and enough people act on that statement by running out to buy as many golf balls as they can to keep their supply from running out then its only a matter of time before somebody realizes that there really IS a shortage of golf balls. BUT It's only because I made the statement and enough people acted on it.