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Thursday, October 9, 2008

Wow, Dow.

Posted by Matt Davis on Thu, Oct 9, 2008 at 1:30 PM

Hold on to your hats:

dow.jpg

The Dow has just plunged through 9000, which is unexpected and sudden, to say the least. It's at this point that you might be interested to know a little bit about how this might affect you, say, for example, if you're living in a house share in SE Portland, and have no retirement savings to worry about.

The Dow is an index of share values for publicly listed companies. People buy and sell shares in those companies and depending on how much demand there is for a given stock, the value of those stocks goes up and down. While stock valuations are dependent on objective factors like how much revenue those companies are generating compared to their costs, they're also influenced by market confidence as a whole. So: When the Dow plunges this much in a given day, it's a sign that market confidence is plummeting, too.

So: While it's unlikely you own, directly, or indirectly, any shares in Pfizer or investment banks, the companies listed on the Dow, it's likely that you do have a stake in the economy as a whole. Your job, for example, is provided by an employer who may or may not depend on market confidence to survive.

In a downturn like this, everybody's confidence is affected. Consumers cut back on luxury spending and stick to the essentials. Employers, too, may look to cut costs. So it's important that you make yourself indispensable.

Portland is, to a degree, insulated more than other cities from the knock-on effects of a national economic recession, because there are other factors driving people to come here, like the fact that it's cheaper than most other livable states and more hospitable than Nebraska. But it's not going to be all that much easier for us than it will be for folks elsewhere.

Personally, I'm terrified. You?

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