All Eyes On Wallstreet

Lehman Bros has folded. Who next - AIG? Domino effect, here we come....:tear:

 

Ok, I read this stuff, but I don't know exactly how it affects those of us who don't have financial stock in those companies. Could someone give me a crash course on how the stock market affects my daily life? I'm not being sarcastic. I really want to know. (Then I can worry along with the rest of you.):saint:

 

I don't know either, but I'm sure it will.

 

I am not sure of all the ramifications, but consider a few things that could happen if the dollar uses, say, half of its value on the world market. Everything we import would jump at least 50% in price, including oil. Some financial people say the dollar could loose 90% of its value ... worst case.

Probably tens, nay hundreds of thousand workers would loose their jobs as most companies have to borrow money short term to meet short term financial obligations. No money to lend, no money to borrow to pay debts.

History does not repeat itself exactly, but if the worst comes about read about what happened after the stock market crash in 1929.

Watch the Nightly Business Report and the News Hours on PBS tonight. They are more even handed with this type of news than the major media outlets.

 

Which is why Congress needs to wake-up and do its job and get our currency back on the Gold and Silver standard, or else it’s gonna get worse. The Federal Reserve is a joke and is ruining our economy.

In XC
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How does this affect us? Well, it will affect you more on your side of the Pond, but it will still affect us too, by virtue of the fact that a major bank has folded, that will reduce the liquidity of the financial markets which will mean that borrowing money will be yet more expensive, just at the time when we could all do with it being a bit cheaper. This of course will have negative ramifications for our housing markets, again just when we needed some good news on that front. As to the falling stock market, even if you don't own shares yourself, I can tell you that my pension and one or two other long-term savings schemes I have are linked to share prices, so if they fall, my long-term financial security falls too. Even if you don't have something like that, lots of other people do, and falling shares mean they lose money big-time, which means they have less money to spend, which means economic growth can stall. Plus, as others have pointed out, a falling dollar means rising import prices which fuel inflation. Remember the 70s - stagflation, anyone?

 

AS I feared, it looks like AIG are next in the firing line. Watch the markets today...

 

I predecit a recovery of the financial markets by 2010, and as I said to my wife, unless the Lord is destroying America.

These kinds of things haven't happened in awhile, but they have happened before. In the mid 80's there was the Savings and Loan collapse. After this the collapse of E.F. Hutton. And then not too long ago was the junk bond debacle which collapsed because of corruption.

The real difference today is we are just dealing with different financial instruments.

The markets will recover, and what is happening today is nothign near to the great depression. In the depression unemployment was at 25%. Today its around 5-6% In the depression foreclosures pushed 30%. Today its around 5% with 2% foreclosures and 3% that are late in their payments. This means 95% of the loans in America are current. In the depression corporate profits were flat or negative for 4 years. Today we are slighly down from last year...meaning corporations are profitable, just not as much.

Bottom line: IT'S NOT THAT BAD. It's not good either. But it's not that bad.

Why do I have this perspective? I'm going on 8 years in the financial industry. I live, eat, breathe this stuff with folks who have been in our industry for 50 years.

RB

 

So what do we do?

Got any money? Take it to a financial advisor (unless you know how to evaluate balance sheets, et.) and look for prime opportunites to buy investments. The market was down slightly over 500 points yesterday. My regret? I didn't get a paycheck that BOUGHT stock funds through my 401k plan.

Inflation is outpacing bank rates. What does that mean? That means if you put money to use at 2-3% or less, your moving backwards. Your losing because of the time value of money. Inflation is pacing above 4% and in my opinion is higher than that because of how inflation is typcially calculated.

You need to find investment returns at or above 6% to stay on pace. In times like these investor behavior is a flight to safety. People want to just preserve what they have built, forgetting that a dollar today can't buy you what a dollar tomorrow will. There needs to be growth. It's not just about capital preservation, it about preserving purchasing power.

RB

 

All I know is my wifes 401K lost $1600 yesterday.

Can anyone suggest a logical place to invest until the storm has passed?

 

If the stocks are in good companies grit your teeth and hang in there. They will come back, but it may take a while.

If you understand technical analysis go to: http://stockcharts.com

There you have access to many types of charts. I have found the point and figure charts the best for my use.

I understand the uneasy feeling in the pit of your stomach this morning. Been there ... kind of there now ... I have some decisions to make. This is a time where there are some real buying opportunities if you have the nerve to do it. It is always darkest just before the dawn and right now, economically speaking, it is dark. It may become even darker, but maybe not.

When investing do not try to pick the bottom to buy or the top to sell. There is a Wall Street addage, Bulls can make money and bears can make money, but hogs will loose every time. So don't try to figure out the exact bottom nor the exact top. Find a trend and get a nice slice out of the it.

 

People need to remember the difference between an unrealized loss and a realized loss. Yes, my 401(k) had a big unrealized loss yesterday, but at this point, it's just on paper, since I have not sold anything. Once I sell something, then it becomes realized. Of course, if you sell now, it could even be a realized gain (depending on when you bought the asset), but just not as much of a gain prior to yesterday.

 

Very true .... good post. We have to keep things in perspective and not let our lives be controlled by 'what if'.

 

Just checked on this thread again and you beat me to the punch. It's like I said in the previous post....I wish I had some extra dough to sock into this down market.

Be a contrarian.

RB

 

Many of you youg people don't remember when the world was on a gold standard. Most people were workin poor and never had any gold except for maybe a wedding band. Middle class growth didn't explode until we went off the gold standard. You all really want to live without credit cards?

 

After all the hub-ub, it looks like the market will have a gain this week. Dow was up over 400 yesterday and is up over 400 today. This will be bad news for Obama who hopes for a collapse so he can exploit it.