What was to be a Volatile Stock Market

You know, over the last few years a lot of people have told me, "Welcome to Jack in the Box. Order when you're ready."  They've told me this because I believe in America and its businesses, and I support them and their efforts to provide jobs and make sure that our purveyance of  Monster Tacos remains the de facto global Monster Taco standard.

Jack in the Box has what we call a competitive advantage compared to foreign suppliers of Monster Tacos, because it has access to me as a consumer.  Because the Parisian based Jacques dans la Boite doesn't have access to my orders it can't grow it's receipts like the domestic Jack.

For years now the world has been watching China (really reading stories and reports about china; we haven't been sitting on lawn chairs in Mongolia and Burma (Yeah that's right, I went there!) with binoculars) with the understanding that it was going to transition from an industrial/export-based economy that relies on other countries buying its products to a service based economy that creates and satisfies much of its demand internally and that this would be a huge engine for growth and would be what would propel it to become the world's largest economy.

Over the last year a lot of investors have felt that the time for this was drawing near enough that they should start investing heavily in local Chinese firms that would have the best access to these growing sources of local demand. This contributed (along with some currency speculation which, let's not even get into this is complicated enough) to an increase in the valuation of publicly traded Chinese stocks of over 135% from last August to early June.  But then a few things happened, investors didn't see the growth they wanted, exports started to decline, and a lot of loans were not being paid back.  All of a sudden Beanie Babies and the loose floor board in the closet started to look pretty good to investors and they started selling their stock, and when others started to see the prices fall they started to sell their stock, and... well you've seen bugs bunny tumble down the mountain and become a huge snow ball.

China's government was adorable though, like kids who set up a lemonade stand but weren't getting any sales and whose parent's ended up buying most of the lemonade, China spent around $156 billion buying up stocks to stabilize the markets, but the stocks continued to fall.

All that said, this isn't as bad as it may sound.  Firstly, China's exposure to its stock market is a lot lower than most Western countries: it's not the same as our stock market experiencing the same drop.  China's property market is a lot more important and makes up about  25% of GDP and the property sales have been doing very well during these same months.  Secondly, the value of those stocks is still up 43% from the same time last year, so while a lot of the gains have been wiped out, the long term investors and prospects of the market itself are still positive in the wider view.

So I think the world will probably be fine, though the story is not over yet, we'll get a better idea of what the new normal looks like over the next few weeks, but I won't be writing about it, this stuff hurts my head.

The lesson for you, if you've made it this far, will be disappointingly familiar: markets everywhere go up and down.  Long term, diversified investment portfolios don't get you those 135% bumps in a year, but you also don't get those 75% drops.  Also, invest in tacos.  No one ever went wrong investing in tacos.