how much of the current world situation do you feel reflects in the stock market, do you think americas current situation is based on it, and does this change always start with the stock market and or follow it. overall what is the stock markets overall impact on daily life in america.

I was thinking about putting this up. Ya beat me to it. Anyway, i think world events have a major impact on what the stock market does. Most like a couple weeks ago would be a good example when Al-queda bombed a Western-residential compound. The stock market reacted as if to say "oh dear. More terrorist attacks." and when the terror alert was raised, the stock market dove all week that week. The stock market obviously doesn't like terrorist attacks since 9/11. I've noticed it goes down after a bombing in Israel as well or when North Korea starts waving it's nuclear sabers around all the time.

During the whole diplomacy fiasco over Iraq, the market went up & down when diplomacy worked or failed, but mostly went down. When the war started, uncertainty was gone & stocks (especially Lockheed/Martin's & Raython) went up.



If you are meaning America's current situation with Al-Queda as well as Iraq, then yes. My reasons above.

The stock market likes stability. Anything that adds to instability leads to a downturn.

Let's face it, a stable economy usually equates to a growing economy, in which most companies make money.

During uncertainty, a certain percentage will take their money out of the market (sell) causing a drop in prices. When things are going well, people get back into the market (buy) and stock prices rise.

Uncertainty in the world will equate to uncertainty in the market.

That explains why the NYSE skyrocketed at the beginning of the Iraq war. I always expected it to go down even farther because the stock market usually doesn't like war.

Exactly. The beginning of the war eliminated the uncertainty.

So the market went up. (simplistically speaking, of course).

And when the uncertainty of winning the war came back during the week of suicide bombers at checkpoints & the 507th(?) Maintenence was ambushed after taking a wrong turn, and somepne announced it may take longer than anticipated, so the market went down

Gotcha!

It's time to buy, and hold for five years.

Why?

That'd make no sense. In 5 years, the whole market could go belly up as fast as it did in 1929 & you'd be stuck with nothing.

I'd buy but after awhile, i'd take the profits (if there is any) and take only half of what i invested and leave the other half to grow until the situation looks dangerous & then pull out

Buying and holding is historically proven the best way to make money in the stock market. Buying stocks in a recession, when their prices are relatively low, is almost a certain winner in a 5 year time span. I picked 5 years because I do not know when the recession will end. I cannot say, with any degree of certainty, that the stock market will be higher in a year. I am fairly certain, from historical trends, the market will be higher in five years. Actually my main recommendation is, if you are under 40, to put all your 401K funds in a low cost index fund. Not a very exciting way to invest, I don't care much for excitement when it comes to finances. I'll put a couple dollars on lotto tickets when I seek to gamble.

It is myth that reoccurrence of 1929 is economically possible.

True but also if there is a big name corporation that decides to come out of the closet and admit it's been making up numbers in it's accounting books, the whole market will ripple into a downward spiral

Only very short term in a healthy economic climate. The Enron situation did not occur in a vacuum. It occurred in a climate where there was a recession and extremely high P/E ratios.

When it is 1 or 2 big names that admits to creative accounting, I can live with it. When it is dozens, I want most of them to go to jail, for a long time.
Most of us expect the market to rise and fall based on uncertainties, but not due to criminal behaviour.