With oil prices dropping briefly below $40 per barrel on Friday (August 21, 2015) and the stock market dropping sharply in the recent past, investors in the public markets are being advised not to panic. The headline for the front page of the Saturday/Sunday Edition of The Wall Street Journal (August 22-23, 2015) reads “Stock Plunge Picks Up Speed.”
Stocks are Plunging
The article provided a graphic showing the performance of the Dow Jones Industrial Average for the last “week of woe.” Each day of the week provided an example of the woe. On Monday it was the Chinese central bank’s resetting the yuan at 6.3969 yuan per dollar. Tuesday saw copper prices in London fall below $5,000 a metric ton since July 2009. On Wednesday, gold hit a one-month high of $1,128.10 per ounce. See the gold price today in Brisbane on this website. Thursday was cataclysmic – Twitter closed at its IPO price of $26 per share, and hit a new record low on Friday. Finally, on Friday, the price of oil dropped briefly below $40 per barrel.
An article by Jason Zweig in same edition of the WSJ is titled “What Investors Shouldn’t Do Now.” The article provides five pieces of advice:
- Don’t fixate on the news.
- Don’t panic.
- Don’t be complacent.
- Don’t get hung up on the talk of a “correction.”
- Don’t think you – or anyone else – knows what will happen next.
Based on my experience in other times of “correction,” Zweig is probably providing good advice. And the Dow is down 10.1% from its previous high, which the pundits say has moved it into “correction” territory.
Correction or not, it is good not to panic and fixate on the news. It might not get better for awhile. And while the news is bad, we can’t get complacent. What I also know for sure is that I certainly don’t know what will happen next. But I guess I’ll ride things out and see, just like millions of other investors.
Another Point of View
What happened last week to the value of the 682 thousand closely held and family business in America with sales between $2.5 million and $100 million? I wrote about these companies in a recent post, The $4 Trillion Opportunity for Business Ownership Transition.
The real answer to my question about the value of private businesses is, not much. Fortunately, the value of these businesses is not as volatile as the public stock markets. You will know as you start Learning to understand the stock market.
We came to work this morning at Mercer Capital, as did the employees and owners of the other 682 thousand companies across the land. And we will continue to do so, regardless of what happens to the Dow or the S&P indices in the next weeks or months.
I’m not trying to be complacent here, but realistic. The markets go up and they go down. Over the long, long run, they have gone up. They have risen because the economy has continued to grow. And private companies in America have grown, in number, size and value, as well.
If you need something to take your mind off of the stock market plunge, read my latest book, Unlocking Private Company Wealth ($25 plus s/h). You may also check this stock forecast. Regardless of what is happening in the public stock markets, private business owners must stay focused on building and realizing value from their businesses.
If you would like to talk about any valuation-related matter during this period of “correction,” please give me a call (901-685-2120) or email (mercerc@mercercapital.com).
Until next time, be well!
Chris
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