Corrections happen, and they can be healthy antidotes to overvalued stocks, buying opportunities for savvy investors. Baron Rothschild said, “The time to buy is when there’s blood in the streets.” The trouble is nobody knows where the market is heading.
Also, we’re a long way from when owning a stock meant being the patient owner of a company one knew and cared about. As Financial Times reported, “Rising bond yields triggered this week’s mayhem, but much of the blame for the selling has fallen on the collapse of two complex exchange-traded notes and algorithmic trading strategies then compounding the declines.” Got that?
At the top of my markers for 2018 was the “omnibubble,” where asset prices have come untethered from their underlying value worldwide. We might have a soft landing. Or not, especially with potential for a trade war, an untested Federal Reserve chairman and an elderly business expansion. That’s where a correction leaks into trouble for the broader economy, and isn’t just a problem for the minority that owns stocks.
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This Week’s Links:
• Wells Fargo board members are getting off too easily | Larry Summers
• Pay or play capitalism | Project Syndicate
• The Chinese banking system: Much more than a domestic giant | Naked Capitalism
• Olympic economics | Tim Taylor
• Marijuana: Falling prices and retailer saturation? | Josh Lehner
Today’s Econ Haiku:
Is inflation back?
Blame it on worker raises?
The dismal science
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