It's the Economy, Stupid.

[Prashun Patel]

Man, is anyone as scared of the Hail Mary bailouts/buy-outs/interest rate cuts as I am?

For those of you invested in the market, are you keeping it in or bailing????

How are you dealing? As an owner of a small business I'm nervous about my receivables...

[Bill Arnold]

I'm the farthest thing from a market expert, but I know what happens in the long run. We have fairly substantial holdings in a series of diversified funds. Our plan is simple -- let it ride. No doubt, we'd be bailing and bouncing things around if we relied on these funds for immediate income. These investments are for the future and we have faith that they will grow quite well as the country recovers from this crisis.

[Ken Fitzgerald]

I will caution everyone to keep politics out of this discussion. Political discussions are against the TOS of SMC.


That being said, I'm in a buy mode in my 401K. My employer matches 50% of what I invest in my account. I will continue to buy and like Bill, I'm diversified....stocks, bonds, large cap and small cap......

I won't make a killing nor take a beating....I hope:confused:

[Jeff Craven]

Man, is anyone as scared of the Hail Mary bailouts/buy-outs/interest rate cuts as I am?I'm nervous. There isn't a quick fix. The banks have gotten themselves in trouble, because the lending standards were too relaxed. They made risky loans, taking advantage of people and now the government is stepping in to bail them out. :mad: I think the whole banking industry is a little evil. We look to them to protect our money, but at the same time, they are trying to profit by coming up with new ways to separate us from our money.


For those of you invested in the market, are you keeping it in or bailing???? Certainly keeping it in. I won't get anywhere by bailing while it is low. The money that I do have in the market is for the long term anyway.


How are you dealing? As an owner of a small business I'm nervous about my receivables...I'm dealing by not watching the daily ups & downs.

[Mitchell Andrus]

Ride it out.

They say the market lost 4 trillion dollars when the market fell back to 9,300 on the DOW the other day. Another way to look at it: this means that the market had created 4 trillion dollars when we went from 9,000 to 11,400. I think the DOW will bottom at 8,850 and stabilize at 9,500 until May '09. Every major industrialized country dropped it's lending rates .5% last night.

I'm holding what I've got and I'm buying more - carefully - while holding back 2 years' income in cash, not counting the kid's college funds which are off limits.

[Anthony Anderson]

Let it ride, it will bounce back. It may take awhile, but it will. Now if you plan to retire in the next five years, then make sure you have your stocks, and MFs in a safer area, IOW now is not the time to risk unless you have money to lose. Transfer/invest in staple producers/products , you can get some pretty decent deals right now, and those will be safe for the long haul. Technology and Investments are often rocky roads, but will net a greater return, if you have the foresight to get out before the big meltdown, as is happening now. This didn't have to happen, government turned a blind eye, b/c many of the politicians were seeing their own portfolios grow beyond belief, so why would they want to mess with that? Or so they thought. Now their portfolios aren't looking so good either, and now they are trying to back track. They are as much to blame as the big investment banks, for allowing this to happen. Kind of like the farmer giving the keys to the hen house, to the fox, and then scratching his head and trying to figure out why all the chickens are gone.

The economy needs to be left alone and only given life sustaining support, while it cycles itself through. This is the only way to control inflation, and to prevent the further de-valuing of the dollar. If we keep messing with the economy, the fall at the end will only be worse. It's time to bite the bullet now, rather than having to bite a missile later. What has gotten us to this point, is the Federal Reserve Chairman, both Greenspan, and then Bernanke, constantly trying to manipulate/stimulate the economy.

Basic economics, is that all economies will have peaks and troughs, it is a cycle, always has been always will. When outside forces try to prevent the troughs, especially for an extended period of time, that's when we start to see skyrocketing inflation, and the dollar begins to weaken. More money is printed to try and "fix" the problem, and the value of the dollar falls further. Get ready for this to get worse. $700b will not be nearly enough. Watch and see. But as always, after it getting really bad, it will rebound, but it will be a long road. I never thought we would see this many huge banks fall in such a short time span. There should not be bailouts, as this will only extend the period of recovery. There should be guarantees on investors money, and individual savings/checking accounts. The eye/bailout is on the mega-corporations, when it should be focused more on the small businesses and individuals. The rewards keep getting better for the fox who is raiding the henhouse. If taxes are cut, in any way, shape, or form, in the next administration, regardless, who is elected, we are in for a very scary ride. Taxes need to be increased to pay for all the spending that is happening. We cannot pay for these expenses, and are selling bonds to China, Japan, and many countries in Europe, to pay for things that we cannot afford. And we still are hearing about cutting taxes. Doesn't make sense to me. But then again, raising taxes is not popular, and people does not want to hear that.

But then again, who am I? I am no expert. These are just my opinions. Regards, Bill

[David G Baker]

If I was going to bail out I should have done it months ago. I am down around 35% and am starting to eat into my principal but I am going to stick it out. I am also well diversified and have some in a money fund waiting for the near bottom and am buying back in. This is how I made most of the money in the first place.
I am retired and have finally reached the point where I can just barely scrap by on my pensions and Social Security so at this point I don't have to take from my investments for my living expenses.

[Greg Cole]

At my age, I'm in and staying for a long while yet. At 34 there's many years left ahead of me, hopefully anyway.
I am also very thankful I am not the "typical individual" in my generation... no 2500 sq foot home for 3 people, no Escalade in the driveway per say. I live in a small comfortable home I will be able to afford regardless of almost anything, both vehicles in the driveway are paid for. We resisted the urge to move up in housing a couple years ago and glad we stayed put.
The lending standards and institutions have had too much proverbial rope and the continual deregulation really let the dogs loose and pack mentailty took over. I also look to the individuals who put themselves in such a vulnerable position, it's not always the lending institution(s), it takes two to tango.

[Derek Tuchscherer]

Amen to that Greg.

My wife and I, at early 30's ourselves are sitting in about the same situation as you...and feel perfectly content because of it.

[David DeCristoforo]

We have to get real here. If we do not come to terms with the fact that debt is not a commodity, we are never going to get out of this. I don't think housing prices are ever going to reach the overly inflated values they were at when this whole thing started to crumble. So the idea that we can buy up this debt (which we refer to as "assets") and then resell it later when prices are up again is inherently flawed. We have to restructure all of the bad debt, write off the losses and then we can go forward. This means a lot of people are going to lose some money. No way around it.

[Prashun Patel]

I totally agree that debt is bad. Debt for financing cashflow is great. Debt to finance speculation is bad.

I'm a Suze Ormond kind of guy: Pay yr debt off.

[Aaron Beaver]

We are considering moving our Mutual Fund money market account into an FDIC insured money market account. We just haven't decided if its the right thing to do or not. This money wasn't for retirement it was more of a savings account. Granted it may gain more in a mutual fund account but its not insured.

Thoughts?

[Anthony Anderson]

I totally agree that debt is bad. Debt for financing cashflow is great. Debt to finance speculation is bad.

I'm a Suze Ormond kind of guy: Pay yr debt off.

That's funny Shawn. Last I heard Suze Ormand is having a hard time following her own advice. Please don't take offense. It's just that everytime I see Ormond on t.v., I have to change the channel. She tends to rail on the people who are in financial trouble, and in fact, she has many of the same problems that her viewers/callers have.

[Frank Hagan]

We are considering moving our Mutual Fund money market account into an FDIC insured money market account. We just haven't decided if its the right thing to do or not. This money wasn't for retirement it was more of a savings account. Granted it may gain more in a mutual fund account but its not insured.

Thoughts?

You are insured against both a bank failure and the loss of your principle in a FDIC insured account. Most money market funds are also insured against a failure of the company holding them (but not against loss of the principle). But you have to check with the financial company (I know Fidelity has the insurance, but again, you can lose money if the fund "breaks the buck", but not if the company goes under).

If you are looking for a relatively safe investment that will earn more, look at municipal bonds; right now, they have the highest yield (and offer some tax advantages if you are in the highest brackets).

I feel OK with my money market funds at Fidelity. I did shift all my "immediate cash" savings into the money markets and out of the stock mutual funds. For our IRAs and 401k money ... I'm letting it ride. We've lost about a third of the value, but I don't need to cash in for another 15 years or so. "Sell low" is not a good strategy if you have the time to wait.

[Prashun Patel]

That's funny Shawn. Last I heard Suze Ormand is having a hard time following her own advice. Please don't take offense. It's just that everytime I see Ormond on t.v., I have to change the channel. She tends to rail on the people who are in financial trouble, and in fact, she has many of the same problems that her viewers/callers have.

I didn't know that. Oh well, that'll teach me to worship false idols ;)
Anyway, her advice still resonates with me. "Do as I say, not as I do".

[Kevin Arceneaux]

In and buying.

Hopefully I will get some time off one day to enjoy it.

7x10 in Hackberry LA

[Mike Wilkins]

Unless you need the money today, like for a new Porsche or a Felder KF700S, I would just stay in the market and ride it out. Historically, stocks have always bounced back stronger than before. History has proven this out.
There may even be some bargains out there. I just never seem to have the money to take advantage of them.

[Chris Padilla]

My FA called me last week and told me to put my 401(k) into the money market fund we have available to us.

He feels the market still has much more shoveling to do. I was already down nearly 25% so I rode as long as I could and then bailed. However, I'm young (39) and could roll with everything but my FA has yet to steer me wrong in 5 years.

Folks, this market is unlike anything in the past and it goes way beyond the US. I dunno...I'm playing it safe for the mean time.

[Tom Veatch]

My investments are in income producing mutual funds. Didn't buy them for capital appreciation, so as long as they continue to produce income they are accomplishing the purpose for which they were purchased and I don't intend to sell them. So, their per share NAV is of secondary concern to me and I'm letting them ride. Besides, the lower the NAV, the more shares the reinvested dividends will buy.

In other words, I've decided to decline participation in the panic.

[Ben Rafael]

There are 2 type of money market funds:
Those at an FDIC insured bank,
Those at a brokerage/mutual fund.

Bank ones have no risk and low interest.
Brokerage/Mutual fund ones have a risk of losing principal and low interest. This type of account makes no sense given the risk/reward involved.

For those who want some liquidity and decent interest there are short term CDs are being offered daily with advertised rates as high as 4.25%.
Banks are having problems meeting their capital requirements and are also offering unadvertised CDs with higher rates. The best way to find these rates are through a brokerage that has easy access to these rates; it's easier than calling a few dozen banks.

[John Schreiber]

I think this is going to be a serious downturn and I hope we can learn from it and make the economy more robust in the future. Personally I am keeping my money in and dollar cost averaging more in. I am going with the assumption that generally, over time, the market does well.

We have a very small sample size for that assumption. Only about 115 years and the game today is not what it was 20 years ago, let alone 100 years ago. In fact, the game changed a great deal recently and most people including me didn't know it. Instant credit has multiplied the usefulness of money, but it can't go on forever.

We are making a very serious wager without really knowing the odds.

[Ben Rafael]

The time to buy is when the market is down.
Warren Buffett is putting $5billion into Goldman Sachs and he isn't doing it just to be patriotic.

[Randy Cohen]

For those who want some liquidity and decent interest there are short term CDs are being offered daily with advertised rates as high as 4.25%.
Banks are having problems meeting their capital requirements and are also offering unadvertised CDs with higher rates. The best way to find these rates are through a brokerage that has easy access to these rates; it's easier than calling a few dozen banks.

where do you find this? i've seen some that are WAMU but that doesn't seem to be real safe.

[Butch Edwards]

stay in or get out? I'm lucky, my Fed retirement is in G fund(Treasury bills)..low interest, but zero losses... my wifes' 401 took a beating, but what the hey, it's out of our control... I do worry that the world-wide market isn't as good as the "experts" thought it would be, nor will it regain what it was. when sooo much of our market is foreign money,and increasing yearly,and theirs is dropping like ours, then I suspect a rapid catch-up isn't happening...or gonna happen anytime soon. the feds have all but give free $$ to the market and it's still not helping motivate investors...just the opposite is happening..people are tired of losing their investments, and are cashing out...a "bird in the hand attitude" demonstrated before our eyes. will the market recoup? how about a better question that'll directly affect the 1st question:will american manufacturers ever get back to the quantity of production they had in the 50s-70s? if the answer is no, then how,or better yet-- who, will be feeding the market?

[Ben Rafael]

where do you find this? i've seen some that are WAMU but that doesn't seem to be real safe.

It's safe if you dont exceed the FDIC insurance limit. WAMU was selling 7% CDs about 2 weeks ago, for only a day.
You can either call banks daily and ask them about their CD rates or you can call a brokerage that has access to the best rates from banks nationally. It changes daily and even changes during the day. Troubled banks are likely to have the higher rates.
Wachovia has a 12 month CD for 4.25%

[Joe Cunningham]

The time to buy is when the market is down.
Warren Buffett is putting $5billion into Goldman Sachs and he isn't doing it just to be patriotic.

"Perpetual Preferred Stock"

He didn't do it because he was getting common stock.

[Brian Elfert]

I'm much more worried about losing my job due in part to the economy than losing money in the stock market. Other companies in the industry have laid off huge amounts of employees and my employer will likely be forced to do another round of layoffs.

Unfortunately, I don't have a bunch of money to worry about losing in the stock market. My 401K is invested there, but I have many, many years before retirement to rebuild my 401k.

[John Schreiber]

The time to buy is when the market is down.
Warren Buffett is putting $5billion into Goldman Sachs and he isn't doing it just to be patriotic.
Warren Buffet can afford to gamble $5 billion. The odds are on his side, but if he looses, he wont be hurting.

[John Keeton]

You haven't lost a cent if you don't sell. Our market seems to have been operating for several years in a speculative mode - similar to the oil market - instead of being value driven. Some of what is happening is adjustment, some is truly a part of the global credit issue.

But, I do believe it will come back. I have had past years with 20+% drops in my funds, but overall have recovered quite well. The timing is not good on this dip as I would like to retire in 6 years or so, but if I have to work longer I just will. Been doing it for a lifetime, so I'm pretty use to it.

Don't be a participant in the "panic mode." You will just lose money and add to the problem. Cost averaging is always the best rule. Buy regularly, sell rarely. And no one, I repeat, no one, can predict the market. Don't try.

[Aaron Beaver]

There are 2 type of money market funds:
Those at an FDIC insured bank,
Those at a brokerage/mutual fund.

Bank ones have no risk and low interest.
Brokerage/Mutual fund ones have a risk of losing principal and low interest. This type of account makes no sense given the risk/reward involved.

For those who want some liquidity and decent interest there are short term CDs are being offered daily with advertised rates as high as 4.25%.
Banks are having problems meeting their capital requirements and are also offering unadvertised CDs with higher rates. The best way to find these rates are through a brokerage that has easy access to these rates; it's easier than calling a few dozen banks.

Thats the kind we have, just considering moving into a Bank Mutual fund or something else. Granted we could ride it out like some say, just have to see if we feel comfortable enough to do that.

[Bill Arnold]

... For those who want some liquidity and decent interest there are short term CDs are being offered daily with advertised rates as high as 4.25%. ...
Our regular bank and the credit union are only offering CDs in the 3% range. Another local bank offered 5% on a 6-month CD last Saturday only. We moved a moderate amount of our liquidity into their CD to help the balance.

Our IRAs are down about 20% since a peak in May. Fund performances are all over the place, but that's the reason to be diversified. The only fund that has actually gained on recent statements is Ginnie Mae.

:eek:

[Justin Leiwig]

I'm ok as I don't have a whole lot invested in the market yet.

On the other hand I'm very much more worried about the local economy that affects my job and well being. While the government is bailing out big businesses, I know of three local governments that if something doesn't happen in the next month then they will default on all their loans and mortgages due to loss of tax revenues and such.

It will be interesting to see how this "financial crisis" compares to the 1929 depression. Then we only had to worry about our economy. Now since we are a "global" economy things are completely different. Still the same cause though, too much credit floating and not enough hard cash to back it with.

Did anyone see the article about Iceland going bankrupt yesterday?

[Michael Schwartz]

Right now I am more inclined to ride it out as my portfolio is already down, and I am against panic selling unless things are really bad. However being young as long as my portfolio is back up in a few years what is going on now will be forgotten.

I try to invest the vast majority of my portfolio in companies that I am confident are "unsinkable", have large capital, and make sound products that are and will be in demand regardless of trends or fads, and of course that will more than likely show a good return 10-15 years down the road.

but all in all politics aside the current market situation saddens me because a good portion of it is due the the violation of a basic principle of logic on the part of the banking industry and society.

Don't borrow money unless you are 100% sure you can and will be able to pay it back.

Don't Loan out money unless you are 100% sure that you will get it back.

I have seen way to many people buying homes that are no only overpriced, but that they can't afford. Even worse the people who finish paying off their mortgage only to get a home equity loan putting themselves back into debt just to fill their house with expensive luxury items they can't afford.

[Ben Rafael]

Our regular bank and the credit union are only offering CDs in the 3% range. Another local bank offered 5% on a 6-month CD last Saturday only. We moved a moderate amount of our liquidity into their CD to help the balance.

Our IRAs are down about 20% since a peak in May. Fund performances are all over the place, but that's the reason to be diversified. The only fund that has actually gained on recent statements is Ginnie Mae.

:eek:

Credit unions are not known for offering high rates on savings.
I saw a 12 month CD advertised in the paper today for 5.25 percent. Banks are having capitalization problems, these rates should be available for awhile.
Just remember, after taxes and inflation CD's are a loser.

[Eddie Watkins]

I moved most of our investments to treasury notes early in the year then moved the rest a few months ago. I would like to take the credit but the advice came from a financial news letter I get.

[Scott Donley]

Should Have, could have, would have :( For now, a bottle of wine and a nap, wake me when it's all better :)

[Butch Edwards]

I moved most of our investments to treasury notes early in the year then moved the rest a few months ago. I would like to take the credit but the advice came from a financial news letter I get.

at least you ain't losin' money every day!!! ;)

[Eddie Watkins]

at least you ain't losin' money every day!!! ;)

I tell LOML every day how much money we made or rather didn't lose:rolleyes:. We did lose some early on and then, because I didn't move it all, we lost a little every month until I finally moved the rest.

[Greg Peterson]

I'm riding it out. But I think we are nearer the beginning of the correction than we are the end.

As complex as the contemporary financial industry is, it will take a long time to get an accurate fix on what the real condition of it is. Meanwhile, confidence is eroding faster than cotton candy in the hands of a eight year old. And without confidence, the markets health is a moot point.

[Justin Leiwig]

but all in all politics aside the current market situation saddens me because a good portion of it is due the the violation of a basic principle of logic on the part of the banking industry and society.

Don't borrow money unless you are 100% sure you can and will be able to pay it back.

Don't Loan out money unless you are 100% sure that you will get it back.

I have seen way to many people buying homes that are no only overpriced, but that they can't afford. Even worse the people who finish paying off their mortgage only to get a home equity loan putting themselves back into debt just to fill their house with expensive luxury items they can't afford.

I hear this a lot, and at least in this area it's far from the truth. How many people would have believed 5 or 10 years ago when they took out those mortgages that their $30 an hour job at GM or Ford or any of the other major manufacturers would be gone? All this area ever knew was that the people working for GM or Fridgidaire or one of the other major manufacturers were the ones with the nice houses and the new trucks. When I was growing up it was something to aspire to.

Mortgages around here are failing because plants are closing and jobs are lost and there is no industry to replace them. The local GM plant here is closing at the end of the year. That's 3400 workers from the plant, plus there are 43 suppliers identified by our agency that will most likely close as well unless they can adapt to make new products not associated with the automotive industry. DHL is closing their hub here as well. That's over 8000 people no longer having good paying jobs, along with another 20 or so associated suppliers. Suddenly we don't need 3 hospitals or 5 grocery stores or 2 movie theaters since there aren't paying customers and so on and so forth it goes until people are stuck and no way to get out. Now there is less sales tax and income tax revenue, so your local government, who unlike the federal government is mandated to balance their budget at the end of the year, has to make cuts. They can't make their budgets, so their cutting services...there goes a couple fire stations, we don't need safer communities.

All this while right now in our county public services are seeing an increase between 30 and 50 % due to people not having jobs or money or places to live.

Don't believe the hype when someone tells you that it is the fault of the American people that their American dream has been ripped up out of the soil and sold to China because someone told them it's cheaper and will actually benefit the American people by leveraging their buying power against their dollar earnings.

[Prashun Patel]

Even if credit starts to flow again, I think a lot of individuals will be reluctant to re-enter the equity markets for some years.

[Arnold E Schnitzer]

I think we're going to see a bottom in the Dow at about 7000-7500, which is probably where true "value" lies. In that range I am a buyer. For now I'm holding on with blinders affixed.

[Jeffrey Makiel]

Justin and Michael,
I think that both of you are correct. The systemic problems in our society today have been germinating for many years and have several contributing causes, and probably a few root causes.

-Jeff :(

[Chris Padilla]

I think we're going to see a bottom in the Dow at about 7000-7500, which is probably where true "value" lies. In that range I am a buyer. For now I'm holding on with blinders affixed.

That is precisely what my FA told me.

[Dennis Thornton]

I just received my 401k statement. I'm fairly well diversified except for the 25% I keep in real estate. Everything was down, except for real estate. I made money there. go figure. :confused:

[Chris Padilla]

Dennis,

Sales are up around my neck of the woods in the SF Bay Area. I think some felt a bottom was hit but I think there is still more to go....

[Clifford Mescher]

I just received my 401k statement. I'm fairly well diversified except for the 25% I keep in real estate. Everything was down, except for real estate. I made money there. go figure. :confused:
Those statements are usually a week or so in the past. Clifford.

[Phil Thien]

Well, as long as we're making predictions...

A friend of mine called me this afternoon and said today was the bottom (what, like 7800 on the Dow). I see some of you feel the same way.

My friend wanted me to make a call and I'm going with "not bottom" for reasons I won't spell-out here.

[Rob Damon]

I had an uneasy feeling, like I did back before the 2001 bust. I moved all of my inheritance and investments into CD's back in May and have lost nothing from this economic situation, even though the bank and FA guys suggested at the time I was crazy for tying up my money in those low yield investments at the time. My CD'S are running between 4.5 and 5.25 APY when I got them.

But the real question is, how far down does the economy have to dip before Festool will put all of thier tools on sale??????? A nice Christmas 25% off all items in stock sale would do. :D:D:D:D:D:D

Rob

[Butch Edwards]

I hear this a lot, and at least in this area it's far from the truth. How many people would have believed 5 or 10 years ago when they took out those mortgages that their $30 an hour job at GM or Ford or any of the other major manufacturers would be gone? All this area ever knew was that the people working for GM or Fridgidaire or one of the other major manufacturers were the ones with the nice houses and the new trucks. When I was growing up it was something to aspire to.

Mortgages around here are failing because plants are closing and jobs are lost and there is no industry to replace them. The local GM plant here is closing at the end of the year. That's 3400 workers from the plant, plus there are 43 suppliers identified by our agency that will most likely close as well unless they can adapt to make new products not associated with the automotive industry. DHL is closing their hub here as well. That's over 8000 people no longer having good paying jobs, along with another 20 or so associated suppliers. Suddenly we don't need 3 hospitals or 5 grocery stores or 2 movie theaters since there aren't paying customers and so on and so forth it goes until people are stuck and no way to get out. Now there is less sales tax and income tax revenue, so your local government, who unlike the federal government is mandated to balance their budget at the end of the year, has to make cuts. They can't make their budgets, so their cutting services...there goes a couple fire stations, we don't need safer communities.

All this while right now in our county public services are seeing an increase between 30 and 50 % due to people not having jobs or money or places to live.

Don't believe the hype when someone tells you that it is the fault of the American people that their American dream has been ripped up out of the soil and sold to China because someone told them it's cheaper and will actually benefit the American people by leveraging their buying power against their dollar earnings.

I agree with this entire post..
...and I must ask: whos' fault IS it? :confused:

[Phil Thien]

I agree with this entire post..
...and I must ask: whos' fault IS it? :confused:

Drum roll please...

The blame goes to... (more drum roll): ECONOMISTS.

The models used by economists are laughably simplistic.

And this is coming from a guy that took Mathematical Economics (graduate preparation courses).

I can assure you that ECONOMISTS (at least all the simple-minded ones I know) are the problem.

They have misled you.

[Ben Rafael]

Who listens to the economists?
They are the problem.
If economists knew what they were doing then they would all be richer than Warren Buffett. But most eat at all you can eat buffets and have wives that look like Warren Buffett.

[Ken Fitzgerald]

Folks,

This thread is accomplishing absolutely nothing.

It has deteriorated to people attacking a profession which is against the TOSs of SMC.

Because of the violations of the TOSs this thread is closed.