How Low Can It Go?

I watch the stock market. I don't invest, don't own any stocks. I don't really understand all that much about financial stuff, bonds, and money markets and certificates and what not. But I do keep an eye on the market, whether it's up, whether it's down. I've gotten pretty good at telling which way it's going to go too, just by keeping an eye on the previous day's indicators. Right now, the market is down. Way down. It's erased all of the gains it made this year. My guess is that it'll keep going down for a while. From everything I've read, there are a lot of jitters in the market right now. Investors are timid. Things are too unstable.

And I think that's about right. After all, the market has been surging up and up ever since it hit bottom back in 2008, but the rest of the economy has not been doing so well. Unemployment is still hovering just below 10%, and that's the official number - it doesn't include the people who've simply given up looking for work and are no longer receiving unemployment benefits. Factories aren't producing much. Corporate profits are down across the board, and corporations are sitting on piles of cash, refusing to hire new employees or increase production. Millions of foreclosed houses are still glutting the market, and it's going to take a long time to sell all of those homes. Because of the housing glut, home builders have not been able to start constructing new homes, and home construction has been one of the main ways that the country has risen out of recessions in the past. Not this time, though. Banks have tightened credit, making it more difficult for people to buy houses, even people with steady jobs and good credit. So with a weak, jobless recovery and limp anemic economic growth, why has the stock market been rising in the first place?

All I can figure out is that there are people out there who have a lot of money, and they want someplace to put that money. So they buy stocks and bonds, on which they receive interest. If the stock's value is high, they receive a lot of interest; if it's low, not so much. So investors buy valuable stocks, which return greater interest on their investments, and sell off less valuable stocks. But here's the weird thing: if an investor starts selling a stock, then it is viewed as less valuable by all of the other investors, and they'll start selling too, and the value of the stock falls even more. It works the other way around too. And all of this buying and selling of stocks is only marginally connected to the company whose stock it is.

In the film L'Eclise, there's a scene when the Italian stock market crashes, and afterward this young woman asks her boyfriend, who's a trader, "What happened to all of the money?" And he tells her there was no money. "But where did it go?" she asks. He then tells her it didn't go anywhere, because it was never there to begin with. How strange is that? And yet, that's the system we've built. And now, we're seeing the market plummet once again, and investors are wondering if we're going to go into a double-dip recession. I'm wondering if we ever came out of the recession to begin with. I doubt whether the millions of unemployed workers would tell you that we had.