Stock markets in the United States plunged today, in response to sharp drops in the Shanghai composite index, erasing all of the gains it had previously made this year. For the less financially savvy among us, see below for an FAQ that explains the situation.
What is going on?
Stocks in the United States went down on Monday as a part of a massive sell-off in response to fears about continued doubts over the stability over China’s economic slowdown.
Woah woah woah, hold on. I don’t understand what the fuck you just said.
Um, which part?
All of it. Explain what a stock is again?
Oh. Wow. Okay, well, stocks are financial instruments that allow for individuals to invest in a company without purchasing the entire company - but rather a smaller share of the company - and which allow for companies to sell part of their company and thereby accrue capital for further growth. The stock market refers to the various marketplaces, like the New York Stock Exchange or the NASDAQ in the United States or the Hong Kong Stock Exchange in China, where these individual shares of company stocks can be bought and sold. As they are bought and sold, the value of an individual share of stock - and thereby the total value of an entire company - fluctuates constantly. So, given the basic dictates of supply and demand, when people are afraid that stocks are going to go down, there is a rush to sell, which drives the prices down since there are suddenly more people who want to sell than want to buy.
Wait. So, people were afraid that the price of stocks were going to drop … so they all rushed to sell off stocks … which in turn caused the price of stocks to drop in value, thereby causing the very thing they were afraid of?
Um, well, it’s a little bit more complicated than that, but yeah, that’s pretty much what happened.
That’s dumb. Stocks are fake.
Well, I wouldn’t say they’re fake.
They’re not real. When you buy a stock, you own an imaginary thing, which is bought and sold in an imaginary marketplace of other imaginary things, which at this point is largely at the mercy of computer algorithms buying and selling large amounts of this imaginary thing at rapid speeds.
Okay, so you actually do know a little more than you were letting on before. Sort of feels like you were just setting me up to get to this point.
No, no. I’m an uninformed questioner. Here, I’ll ask you another question. Why are people calling it Black Monday?
Well, the trending hashtag #BlackMonday is a reference to Monday October 19th 1987, dubbed Black Monday, when global stark markets crashed, meaning the price of stocks dropped precipitously in a short amount of time. That day, as with today’s drop, the plunge began in the Hong Kong market.
So, then you agree that stocks aren’t real and are just a way for those already with capital to try to glean a bit more capital off of that capital?
Okay, there you go again. That’s not what I was saying. Don’t you have any more questions about today’s drop? I mean, the day opened with a 1,000 point drop in the Dow.
That’s only represents a 5% dip, hardly a crash. More of a correction. Our six year long bull market, which has been going since the 2008 crash, is going to survive this, I’d say. The S&P 500 would need to dip below 1,708 to be a bear market, which I’m sure as you know is defined as a 20% decline from the previous high. The S&P is at 1,921, last I checked.
Alright, show off, if you’re so smart, what advice would you give to stock owners in light of today’s plunge and ongoing market concerns?
Shit man, I don’t own stocks. I keep all my money in gold bars I keep buried in a pit in my backyard.
No man, I’m not an idiot. I do low-yield but guaranteed 10-year government bonds.
Well, good for you. I’m freaking out because I lost $15,000 in a few minutes this morning.
Did you lose that, man? I mean, who are you, you know? We’re each just imaginary halves of a fake conversation, which has really devolved from the promised FAQ format of the title. Face it, my friend, you are as imaginary as the stock market.
Today has gone from bad to worse.