When We're Buying Things, We Should Probably Be Buying Things

So, this is some very not good news.  If you look at the graph above you'll see some similarities and some drastic differences. The green line is representative of the stock market, and what stocks are being bought and sold. The red line is representative of what actual products are being bought and sold. The red line is what is known as the Commodities market.

The Commodities market tracks the buying and selling of actual things. It tracks how many physical things are actually bought and sold. It tracks the movement of products. Physical products. Not just pieces of paper.

So what does NASDAQ track? Well, that's complicated, but I guess it tracks the buying and selling of pieces of paper which acknowledge parts of (small) ownership in a company. But, it doesn't actually track the buying and selling of t-shirts, or books, or beach towels, or anything that you can use for anything other than your hopeful retirement account. I acknowledge that this is a bit of an oversimplification, but I think the definition still works for the purpose of this writing.

If you look at the graph, you'll see that there is a time around 1997 where the NASDAQ and the Commodities markets separate. If we think back to what was happening at this time then I think we'll remember that this was what they called the .com bubble. And then it corrected itself around 2001. The stocks and the commodities rise and fall together for a little while until 2008 when there was a collapse, but the FED also started printing monopoly money and forcing it out into the economy. You can see that the commodities - though at a slightly lower level - tried to keep up with the FED's quantitative easing, but eventually, reality kicked in and commodities started going back down to earth. But not the NASDAQ. People kept right on buying intangible products with fake money without care.

What does this mean for you and for me? I'm not going to predict doom and gloom (even though I'm rather tempted to), but I myself am going to exercise caution in the coming months and years when it comes to larger purchases of things which I don't necessarily need. If history is any indication, the discrepancy between these 2 markets will correct themselves eventually. I don't want to advertise fear, but I think that caution would be advisable. Even if the two markets meet in the middle, the large drop for the market will be a huge readjustment and will definitely be noticeable.

Sorry to ruin your day.

"No one can serve two masters, for either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve God and money. "Therefore I tell you, do not be anxious about your life, what you will eat or what you will drink, nor about your body, what you will put on. Is not life more than food, and the body more than clothing? (Mat 6:24-25 ESV)