Tuesday, October 6, 2009

Stocks Are Down But Should You Invest?

I am noticing that compared to last year, this years stocks are down. Should you be doing a "bank run" ? If you ask the banking sector of course you will get a "no", they do not want that.

"But what does this mean for my bottom line"

Well for one the dollar is a fiat and there is no simple way to answer why the dollar is losing value other than playing the fiat card. Simply put, fiats are based upon trust. They are like units of "trust". When countries go to war with other countries. That puts a bad taste in a countries trust, so the opposing countries with either embargo or traffic goods as a result of bad trade practices. Meaning that if your dollar is being funded for "war" for example, other countries consider that "blood money" and reset their base on which they value that currency. Also the other mitigating factor is how much debt did a country assume during trade over the years.
All the U.S. government experts have varying numbers, but they all agree that the debt is a couple trillion and growing.

So to keep this on point, what does this mean for stocks? Will we totally bottom out? My answer to that is a flat no. The reason why is because stocks represent units of ownership within a company, so that company holds an intrinsic value that is put out on the international market known as a "share" this share thus has a fluctuating value depending on how well the company does. Like the 1930s stocks are falling hard, but unlike the 30s companies are more international, meaning that they still hold an intrinsic value in another currency. Simply put, there will be no "crash" of a market, per se. Rather the dollar will continue to drop in value until we a) have a government with low debt and b) we improve our image in the public relations sector.

If your one of the wise ants that invested in gold in say 2005, you definitely will be handsomely rewarded for your foresight. It is an internationally accepted currency and international resource. Silver, will become the next big thing as gold will become more and more out of reach for the average consumer.