Income investments are better than worrying about Chinese stocks

This week's events in the stock market are a good illustration of the risks of investing in the market for capital gains.

China's stock market dropped about 9% in one day, due to a large number of traders suddenly changing their minds about the price of Chinese stocks and deciding they are overvalued. This large drop then affected a lot of stocks in other Asian and European markets and, and then American traders decided the same.

But what is all this based on -- rationally? I'm certainly not saying I'd want to buy Chinese stocks at their old prices. But I seriously doubt that the true value dropped 9% in one day. And what's the connection between the value of these Chinese companies and American companies? OK, there're some correlations between companies in the same industry, but what's the casual connection between overvaluations?

These sorts of events confirm my belief that financial markets are anything BUT "efficient." They're driven by greed and fear, and this week fear has predominated.

Now, I'm not saying that there aren't realistic reasons to fear for the U.S. economy. We're spending far too much money, the trade deficit is too high, the dollar is too weak and so on. We're much too dependent on oil. Etc etc etc.

So you just don't know what stock prices are going to do in the short term. Or, to tell the truth, in the long term. Yes, the long run they've always gone up and I hope that will continue but I don't have a crystal ball. We do have enemies, and we have no guarantees.

But if you just put your money into income investments all you have to think about is cashing your checks.


income investments
income investments