I’ve posted Article #2 in my series of articles prepared for the Financial Highway site. It’s called The Economy Doesn’t Drive the Stock Market, the Stock Market Drives the Economy.
Juicy Excerpt: It’s not just that we now know of a way to help investors earn far higher returns at greatly reduced risk. If the bull market of the late 1990s was the true cause of the current financial crisis, we can stop future crises by stopping future bull markets. That’s what Valuation-Informed Indexing (which teaches investors to sell stocks when prices get out of hand) is all about.
Juicy Comment: For us uninitiated – how does one determine the “fair value” of the stock market quickly? And how do you actually know that is the fair value and that the fair value can’t change?
The economy we live in today is only accurately thought of in a global sense. As time goes on, the U.S. represents a smaller and smaller share of the global economy.
Our “valuations” may be high, but there are other countries that actually have fair or low valuations.
It is an arrogant, if not inaccurate statement, to think that it is the U.S. economy that drives the global economy.
I agree that we are moving in the direction of having a global economy, Azanon.
Still, I think you are making two mistakes here.
One, what happens in the U.S. economy does indeed affect what happens in the global economy and in a big way.
Two, it is not only in the United States that large numbers of investors were persuaded to follow Buy-and-Hold/Get Rich Quick strategies. So it is not only in the United States that we have seen an economic collapse.
The fact that the Get Rich Quick strategies that have been pushed so hard in the United States have also been pushed hard elsewhere makes it all the more imperative that we get the mistakes in the Buy-and-Hold Model corrected.
Do you feel better seeing a global economic crisis than you would seeing only a U.S. crisis? I sure don’t. I would like to see things fixed up both at the national and international level.
Rob