(A) Chinese stock prices have been overinflated, with too much borrowing to invest in them.
- Andrew Leckey
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(C) Some U.S. government data indicate evidence of economic slowing.
(D) Housing is worrisome and recent increases in mortgage defaults and foreclosures could infect other sectors.
The correct answer can be A, B, C or D, depending on the day. On some days, it is (E) All of the above.
The stock market is supported in 2007 by the tremendous buying power of private-equity firms and hedge funds. But the confidence level of individual investors remains important, ultimately weighing in on the direction of markets.
Every time the stock market takes a plunge, it brings back memories everyone would rather forget. Computers and calculators immediately spew out percentages that are used to show results really aren't as bad as in the past. This helps investors feel better for about three seconds.
When I started covering financial news, markets were dull, dull, dull. Getting somebody on Wall Street to give a reason for a 3-point movement ("There was a Treasury auction today" or "GM earnings were up") was like pulling teeth.
If one was an expert, one couldn't very well respond "Beats me" or "Stuff just happens" or "That movement means nothing." No, one must sound intelligent.
Things heated up in 1987, when the market took a 22.6 percent tumble in one day. Interviews I conducted on Wall Street that day were funereal in tone. Nobody knew if this was the end of investing as we knew it. Unfortunately, too many pulled money out of the market at the wrong time.
I also spent considerable time in the Silicon Valley during its boom years. I met many young hotshot tech execs and recall a senior-citizen neighbor telling me all about his retirement account packed with dot-coms and tech shares of every type.
The subsequent burst bubble generated considerable angst. Egos of young chief executives fell hard, pension funds dropped, workers were fired and more than a few sports cars and mansions had to be sold quickly.
I'd like to think individual investors have grown up as a result of all these hard knocks. But even though we realize that indexes typically have recouped their losses, eventually, we will simply never feel good about our holdings losing value.
Misery is supposed to love company, but having the entire world join in with us doesn't help at all. It just supplies a few more reasons to panic on any given day.
Andrew Leckey is a Tribune Media Services columnist.