October 13, 2014

The Markets

Keep Calm and Carry On.

The slogan comes from a United Kingdom Ministry of Information propaganda poster designed to boost morale if the United Kingdom was invaded during World War II. Despite its current popularity, the poster was never distributed.

The slogan offers some sound advice for anyone who was unnerved by last week’s stock market volatility. During these periods I review your account and make edits if the conditions warrant it.

Secondly, always keep in mind markets move in both directions and it’s the nature of being in the market. Many in the mass media and web sites often elevate people’s emotions with scary and erroneous predictions so try to stay calm and not get caught up with the herd mentality.

Creative Destruction

Collaborative consumption is causing creative destruction! Back in 1942, economist Joseph Schumpeter said creative destruction is the way of the free market. At first, the collaborative or sharing economy was thought to be a response to the Great Recession. Some people needed to reduce costs and others needed to make money, so they found ways to use resources more efficiently by making the most of available time and assets. This is affecting companies in a variety of industries:

• Transportation: Ride-sharing apps connect people who want rides with people who are willing to use their personal cars to provide rides. (If you’ve wondered about autos sporting big pink mustaches, they belong to a particular app’s drivers.) These apps are taking money out of the pockets of cab companies.
• Hotels: You can reduce travel costs by renting someone’s spare bedroom, castle, or villa through an online community marketplace. The downside, according to one study in Texas, is traditional hotels have lost revenue as these communities have gained popularity.
• Finance: When banks and traditional lenders made borrowing a challenge, peer-to-peer lending and crowdfunding platforms provided individuals and entrepreneurs with a new way to source capital. A report from the Cleveland Fed found, “Since the second quarter of 2007, the total amount of money lent through bank-originated consumer-finance loans has been declining on average 2 percent per quarter… Meanwhile peer-to-peer lending has been growing rapidly at an average pace of 84 percent a quarter.”

Whether you want to provide or consume goods or services – cooking meals or eating them, running errands or having them run, hosting a pet or leaving one behind while you vacation – there is probably someone out there who is willing to share their resources.

Weekly Focus

“Always remember that you are absolutely unique. Just like everyone else.”
-Margaret Mead, American cultural anthropologist

The above featured image is held in the public domain.