Financial Meltdown (2 Viewers)

[jazzeum]

Good advice from Brad. One must remain calm and not succumb to panic. Be vigilant, yes, but calm, reasoned and lucid.

 

[Njja]

Easy to say for those with another 10 or 20 years left.

For those ready to retire Jan 1 2009 not so much.

 

[gk5717]

I didn,t get into the market until the early 90's, so until 2000 I knew nothing but great times.
Then in the early 00,s the market took a dive, although nothing like this.
So with me getting within 5 years are so of retireing I decided no new money would go into the market but in bank cd,s.
The best decision money wise I ever made.
Yes I,m loosing a boatload of money, but as of now, nothing off my origional priniciple. I will just ride this out and count on the money in the market as what I will leave to my children.
Gary

 

[Spitfrnd]

Easy to say for those with another 10 or 20 years left.

For those ready to retire Jan 1 2009 not so much.

Actually that depends. As I have said before, no one should invest cash needed short term in the market. So if you are going to retire in January 2009, hopefully you had the foresight to have the cash you need for at least the next 3-6 months. After that, you are not going to liquidate your entire 401K for each next month / year but only what you need as you need it. That of course leaves the remainder for recovery. This is another little detail the daft sensationalist media overlooks in covering events like this.

Also there is the issue of averaging. The declines above and in the media are all measure off historical highs. No one I know of invested their entire portfolio at that point and for most of us it has been a multi year process. Interestingly, the S&P is about even over 5 years, despite the recent crashes. Even more interesting is that quality stocks like Exon, Johnson & Johson and Berkshire are up from 40 to 100 % over that same period.

Then I think some historical perspective is useful. The last big decline started in 1999 where the S&P dropped over 36% to its 7 year prior lows over 4 years; it went on to recover completely in a little over 4 years thereafter. Over 70% of that recovery came in under 3 years. Here, we have already had a 2 year decline of about 36% from and are very likely nearing a bottom so it is not unreasonable to expect a broad market recovery in under 5 years. Then there is the quality issue again. In the last decline, stocks like Johnson and Johnson, Exon and Berkshire had little more than a 1 year decline and exceeded their previous highs in another year. So there is much to suggest that the sky is not falling, so long as the government doesn't mess with it too much. There is much to suggest this is a good time to be in the most blue things you can find.

 

[gk5717]

The one difference this time as opposed to the decline in the early00,s is the so called experts are not saying because stock prices are low now is a bargain time to buy. Just the opposite, don't put money in the market now.
Another sobering statistic I heard the other day was that all gains from 1998 until now have been lost!
Almost 200 points lost again today, where is the bottom?
Gary

 

[Njja]

Actually that depends. As I have said before, no one should invest cash needed short term in the market. So if you are going to retire in January 2009, hopefully you had the foresight to have the cash you need for at least the next 3-6 months."

I believe anyone near retirement, having just watched their life savings

decimated in the recent financial meltdown will take great comfort in your

observations.

Myself after 42 years of work, I feel for people that have worked their entire

lives, only to take a beating they may not recover from or fully understand.

Explaining market stragety to a man that just watched his retirement fade

away seems frivolous at best.

I have not suffered this fate, but I am upset for those that have.

 

[nmrocks]

Another thing to note is the "Shorting" ban comes off today, we'll see what happens tommorrow.

 

[nmrocks]

Another note, they've put off till after the elections any investigation into Fanny/Freddie, now isn't that convienient, there grilling these private interests and ignoring the biggest of them all because 4 fingers point back at them, what a bunch of human refuse these politicians are.
Ray

 

[Njja]

Ray you hit the nail on the head!

How could this be happening in our country?

Where on earth is the press?

 

[Spitfrnd]

I believe anyone near retirement, having just watched their life savings
decimated in the recent financial meltdown will take great comfort in your
observations.
Myself after 42 years of work, I feel for people that have worked their entire lives, only to take a beating they may not recover from or fully understand. Explaining market stragety to a man that just watched his retirement fade away seems frivolous at best.
I have not suffered this fate, but I am upset for those that have.

Frankly trying to explain anything to those who decline to listen is thankless at best. Believe what you like, this too will pass.

 

[Spitfrnd]

The one difference this time as opposed to the decline in the early00,s is the so called experts are not saying because stock prices are low now is a bargain time to buy. Just the opposite, don't put money in the market now.
Another sobering statistic I heard the other day was that all gains from 1998 until now have been lost!
Almost 200 points lost again today, where is the bottom?
Gary

Actually that is not completely accurate. Most value experts are saying stocks are a better buy now than they are in a decade. Buffet is in the buy mode. Many of others are calling for buys and buying or preparing to buy. No one likes to try and call a market bottom; any more than they did in 2002.

Here is another interesting set of statistics from prior big declines
Date Worst 12-month falls P/E after fall 1 year later 3 years later

May 1970 -26% 14.7 30% 37%
Sep 1974 -41% 8.0 32% 52%
Jul 1982 -18% 7.4 52% 78%
Aug 1988 -21% 14.1 34% 51%
Sep 2001 -28% 25.3 -22% 7%
Oct 2008 -28% 12.4 ? ?

Note that in each case except the early 2000 fall, stocks rebounded to more than cover the loss in one year and recorded new gains in three. The early 2000 decline was the bursting of the absurd dot com bubble which had caused stocks to reach unheard of prices and the P/E ratio after the fall was more that double that for any of the other declines.

 

[gk5717]

I ask this because I'm not that knowledgeable on the workings of the stock market.
So are there individuals to blame for this mess or is the housing problems with the foreclosers etc what triggered this.
My only exposure to a downturn in the market was a few years ago and that was blamed on the over evaluation of stocks, which in turn caused a market correction.
Should someone actually be prosecuted as they did for that company in Texas, forgot the name.
Gary

 

[Njja]

Frankly trying to explain anything to those who decline to listen is thankless at best. Believe what you like, this too will pass.

That can be said of anything given enough time.

Your arguments sound to much like all the guff we are currently being fed

from Washington.

You can wrap a rotten fish in silk.....it still stinks.

As does our current financial situation.

 

[Spitfrnd]

That can be said of anything given enough time.
Your arguments sound to much like all the guff we are currently being fed
from Washington.
You can wrap a rotten fish in silk.....it still stinks.
As does our current financial situation.

Funny thing is they are not arguments at all but observations that can be independently verified and which you seem inclined to ignore. Do they suggest that history will again repeat, who knows but they have served well before. I would say if my comments sound like guff to you, imagine what your polemic sounds like to me; I do take a certain amusement from it however.

 

[Njja]

I ask this because I'm not that knowledgeable on the workings of the stock market.
So are there individuals to blame for this mess or is the housing problems with the foreclosers etc what triggered this.
My only exposure to a downturn in the market was a few years ago and that was blamed on the over evaluation of stocks, which in turn caused a market correction.
Should someone actually be prosecuted as they did for that company in Texas, forgot the name.
Gary

Gary:

Its all a big mess, interest rates are to low, the Fed dropped the Prime Rate

today....but its now 1 1/2% where is it goint to go?

Banks were encouraged to loan money to people that couldn't pay by the

government.....then the government allowed them to drop their cash reserves

to 2 1/2% from the normal 10% which means more money went into bad

loans.

These loans were bundled together and sold to people like Leman Bros who

then sold them to investors who were insured by AIG.......is your head

spinning yet?

Then the entire mess came crashing down!

Congress declined to pass the $700 Billion Bailout....so Bernanke quietly sent

$430 Billion into the Financial Markets This on top of the $200-$300

Billion tossed at Bear Stearns, AIG & GM & Ford.

Then congress passed the $820 Billion Bailout

Now markets are still falling as investors pull their money out........so now

Pelousi wants another $150 Billion.........along with $15 Billion for California &

I believe Massachusetts!

As far as someone going to Jail.......who? Barney Frank, Chris Dodd, Bush? I think it would be easier to find someone that isn't responsible!

My advice, turn the TV off and watch a movie.

Right now I'm enjoying John Adams.

 

[Spitfrnd]

I ask this because I'm not that knowledgeable on the workings of the stock market.
So are there individuals to blame for this mess or is the housing problems with the foreclosers etc what triggered this.
My only exposure to a downturn in the market was a few years ago and that was blamed on the over evaluation of stocks, which in turn caused a market correction.
Should someone actually be prosecuted as they did for that company in Texas, forgot the name.
Gary

Fear is a big driver a sell off like this, coupled with the herd mentality and perhaps a bit of mutual fund managers trying to protect their bonuses and hedge fund managers trying to stay solvent. I have little doubt that the liquidity crisis, which in turn is attributed to the junk paper created by the mortgage mess is a big factor. Unlike Enron however, I doubt we will see real securities or other law violations. Besides, how can we put our own government in jail.

 

[Toy Soldier Brigade]

New Jersey will be the next state to ask for a hand out, oops I mean bailout. It's amazing how a state with the highest taxes in the country can be almost bankrupt.

 

[Njja]

New Jersey will be the next state to ask for a hand out, oops I mean bailout. It's amazing how a state with the highest taxes in the country can be almost bankrupt.

Hey do you think its easy to grow those great tomatos?

And just wait, once we get the Parkway Bridges paid off in ah like 2715 why

everything will be just fine.

Oh and lets not forget about those State Trooper Uniforms......someone has

to pay for those boots, and really cool lids!

Not to mention the skirts, or whatever their called.

And you have to admit they need newer cars......

 

[gk5717]

Thanks guys, todays paper had a good easy to understand article on it also.
I agree with Spitfire about the herd mentality relative to the market.
I truely believe this will come to pass, but while it,s happening it sure ain,t fun.
Gary

 

[Ragnar]

If every one is selling then who is doing the buying .
Im sure Warren buffet must be looking at topping up his large holdings.