Although stocks have been rebounding (who would have known) for the past few days, we can not simply ignore the losses that took place late last week and the micro-crash that ensued. Contrary to what economists and market specialists alike have been declaring, everything is not perfect in the stock market. We just got a sneak-preview of what could very likely happen some time in the near future, at a time when panicky investors collectively realize that they have put too much faith into a system that is flawed by nature.
You may wonder why I am constantly proclaiming that a crash is coming. If you follow my blog, you would know that last week, I made a post concerning China’s failure to learn from the mistakes made in the past. In this post, I stated a quote which somehow always seems to be relevant:
“History doesn’t repeat itself, but it often rhymes.”
Right now, things are looking eerily similar to what has happened many times before. Historically, before massive stock collapses, there would be sudden volatility and shakiness in the market. This would be the cause of relatively small, recurring movements in the price of stocks. After falls in prices, there would be upwards movements (rebounds) which would offset the losses. However, some time later (almost always in the months of September and October) the volatility would return and create even greater declines and panic, and in turn would send the entire market crashing when everybody begins selling in an effort to save their money.
In my opinion, the sudden carnage that ended this week should not be considered to be a crash, but it’s very close to becoming one…