In the last year the market has fallen 30+%. The hysterical media is driving this too.
“In the last year the market has fallen 30+%”
After all the “bubbles” of the last ten years or so (real estate, dot-com, etc.), could the market be returning downward to a “true measure” of its actual value, vis-a-vis all the “pumping up” of the last decade?
A house that [before the bubble burst] was selling for a price of 750,000 - yet is no different from one that sells for 200,000 in an area of slow or no growth - is not _worth_ its “market value”. That price was the result of the pressures of low interest, easy credit, subprime [no-background-check] loan agreements, and such. All these combined to puff up the “value” to an imaginary number that was not sustainable over the long term. The _real_ intrinsic value of the house (viewed in terms of the wood/foundation/fixtures that comprise its existence as “a house”) was always closer to the 200,000 value of the same house in some other non-inflated location.
Could the “stock markets” have become inflated the same way? In that the selling prices of the shares (and the perceived value of such shares) had little or no bearing on the _actual_ value of the shares, and of the corporations that they represented?
Perhaps it’s less of a “crash” that we’re seeing, than it is a “return to the baseline” of true values....
The invisible hand at work in a way that no one could foresee?
- John