Strap on your seat belt ... we're in for a rough ride!

Have you ever wondered what it is like to lose 25% of your life savings in two weeks ... welcome to my world. I suppose if I hang around long enough, it will come back.

I just love stock market analysts, though. They behave as if the market were a living being. Typically they will say things like 'The market is waiting to respond to the latest news on the war.' or ' The market reacted to statements from Hugo Chavez about the United States' and so on. This is amazing. The activity on the market is the combined activity from millions of institutional and individual investors. There can be no single entity that reacts to individual happenings in the world. Besides, there are so many events each day, good and bad, to cherry pick those events that fit with market performance makes the analyst job way too easy.

There may be some fund managers that react to specific events (overthrow of a key government) or who follow certain trends (say, oil prices for one example). The average Joe, like myself, is far to busy to try to play craps on a daily or hourly basis with my stock portfolio. I re-balance a couple of times a year as do most of the folks I know. So, it would seem to me that there are two main drivers to stock market performance: (1) random fluctuation and (2) herd mentality. The latter seems to drive the big swings due to panic and euphoria.

At the end of the day, we need to look at the long-term performance which is up. This makes perfect sense because companies are investing and growing and as world demand for products and services grows, that fuels the long-term upward trend. One just has to hope that they are not in a position of needing their money during a period of panic ... like now.

It also pains me to hear people directly tie stock market performance to the economic performance. The two are loosely related. Clearly when housing is down, those businesses associated with housing will not perform as well. When money is tight, business associated with travel and vacations don't do as well. You get the picture. What we are talking about here, though, is segments of the economy. The overall economy can chug along at modest growth when there is a stock market slide and, conversely, the economy can be anemic during a bull market. In the end, most people need to eat, clothe themselves, get to work, and provide for families. This would seem to me to indicate that there is an underlying strength in the economy irrespective of what happens in the stock market.