Monday, January 21, 2008

Stock market update: The Madrid Ibex 35 stock index fell 7% today to finish well below 13,000 points. Iberdrola, Banco Santander, and Repsol are all down eight or nine percent. Frankfurt is off six percent and Paris is off 5%.

Fortunately today is Martin Luther King Day in the States and the NYSE is closed, so everyone will have time to calm down a little and reflect.

I know nothing about the stock market except that schloops like us can't beat it, that there's no way (without illegal inside information) to predict which stocks will rise or fall at any given moment. The only thing you can do is put your cash in a diverse mutual fund, which ought to give you results more or less the same as the market average. And the stock market average does do better than any other investment does, over the long term.

Small investors will be hit hard; 7% of their share value has just disappeared. If you had €10,000 in Santander stock yesterday, you now have €9300. Unlike some folks around here seem to think, though, this money hasn't gone into someone else's pockets. If we use the standard analogy of the pie, then it's the whole pie that shrank, and everyone's piece just got smaller. Nobody's piece got bigger.

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