Why did the stock market fall?


If you have read any of my posts, you will know enough about me to understand my level of market and financial knowledge is not at a professional level. That’s why I’m so curious and hope others are willing to share a little.

Are you also one of the millions wondering why the stock market fell over three days of trading? I’ve read many explanations of why, but I also really want to know how.

Investors are fleeing the market due to lack of confidence in the market: Really? Suddenly all those investors just decided to do this at the same time? The rating downgrade by S&P scared the investors: The decline started before the rating announcement.

The major thing I know from the news reports is that the value of the market fell approximately three trillion dollars in three days. That’s $3,000,000,000.00 missing. Where did it go?

If you look at the individual stock prices, most seem to have lost 5% to 10%. Now, it is difficult to believe that all investors sold their stock for what they paid for it – and simply put the cash into other accounts. If that were so, individual stocks would not have fallen, would they? The value of a lot of retirement accounts (401k’s and IRA’s fell) even though they were not cashed in. If a person was in the process of taking distributions on those accounts, they lost money.

Primary fact – basically a stock transaction in the market requires a buyer and a seller. The difference between the purchase price and the selling is in that $3T. Who uses short-selling, and what was the amount of profit taken from the market for those transactions? Who has a list of the top 200 profit-takers, and how much did each gain?

That’s not all my questions – but enough for now.

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5 comments on “Why did the stock market fall?

  1. weaseldog says:

    Raiding adjustment, I like that. 🙂

    There’s no inherent value in the markets. It’s essentially a casino.

    When you go in, you’re not investing. You’re betting that you can sell your chits for more than you bought them for.

    The only way you can begin to justify the market as an investment is if you are holding stocks that pay a decent dividend. If you look at the trading history on those stocks you’ll see they aren’t bought and sold with the frequency that the gambling stocks are.

    Another thing to remember is that we can’t have a lot of Americans retiring at once. They’ll withdraw money too fast and drop the market. The Fed has already been given the authority to freeze 401ks disbursements if this occurs.

    In Argentina, the problem with folks withdrawing their 401ks got so bad that Bank of America was given the right to simply close the 401ks accounts they managed and keep the assets. The same was done for IRAs and pensions. By doing so, they ‘saved’ the market.

  2. It’s a tough call the markets have been swerving up and down. I wonder if we stopped paying attention to the markets went about our daily spending would it still have an impact? And the answer I think is yes because we still need to find away to save for our retirement and children’s education.

    It’s by cutting out the day to day things like vacations and eating out which begin to hurt the economy. It’s when consumers stop spending that small businesses get hurt in the crossfire. I’m not sure what the answer is to this mess. But I’m also saving my pennies for a rainy day.

  3. rantosaurus2 says:

    I call it trading adjustment. The markets have been ignoring the real economics and now faced with debts never seen before. We are going into stagflation, inflation with recession. But our leaders will tell us all is well, they have to, and print money

    • Texasjune says:

      It’s good to understand more than one perspective. You call it “trading adjustment,” I call it “raiding adjustment.” Guess we’ll find out. Sometimes listening to leaders is much like listening to parents – they don’t always know the whole story! (some care, some do not)

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