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And so the blood bath begins

Ecomike

Ecomike

NAXJA# 2091
NAXJA Member
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Last edited:
It means we are all Focked big time!
 
SoreRunner said:
I'm not a stock style of a person. What does this mean when the DOW has dropped almost 800 points in a day?
Click to expand...

Ecomike said:
It means we are all Focked big time!
Click to expand...

Lol...no, it doesn't mean we're "focked big time". The DOW is just a index of 50 "blue-chip" stocks. GE and Coke are examples of Blue Chip stocks. When the DOW drops, that means people are selling off their (usually considered) higher return assets (which means higher risk...return does not ever come without risk) to buy in more stable, low risk markets such as bonds. I'm not saying this situation isn't bad, but you have to remember who controls the DOW average/stock market. The interests of your typical investing for retirement person is different than the interest of people who play the stock market game for a living.

If you are not nearing retirement soon...your investing strategy should not change at all right now. You're getting a better buy. 5 years from now, you will have more equity in the stock/funds you buy right now than the ones you bought last year and the ones you will buy next year or the year after.
 
SoreRunner said:
Yeah I keep reading things like this, but what does it actually mean people are doing for it to drop? And why are people doing it?
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It's too complicated to explain over the intranets...actually I just don't feel like typing it all...:confused1.

Read up on some basics about the stock market and how it works and you'll see what I mean. There is a relatively small crowd that controls the overall direction of the market. The DOW dropped today yet not that many who are your average long-term investor sold anything today. It doesn't make sense to do so. We're just along for the ride that those who move the market bring us on. Eventually they will step aside and let corporate and economic growth bring the DOW (and the rest of the market) back up on it's natural path of growth.

I'll see if I can find the article but I read one yesterday, written by a market analyst, saying how this is purely a sign that the market works. It makes alot of sense. Companies were making horrible decisions, they go out of business (or at least the threat of it is there), they drag the market down with them...it will come back up.
 
Yup. High risk investors are running (selling) and making it seem like the market is doomed. Low risk-long term investors will be fine as long as they don't panic.
 
Here are a few good points...

SM: Most people do their investing through their 401 (k) plans. What should they be doing with them now?
JD: This is an opportunity to reassess your risk tolerance and go back to your plan. If the markets have caused your asset allocation to get out of balance, take this opportunity to rebalance your account and make sure it matches your risk tolerance. Make sure you don't chase performance. This is less about what happened yesterday and more about what happens tomorrow.
A natural instinct is to run to the sidelines, and typically that's not a good reaction, but it is more of an emotional reaction. What's interesting in this environment is that although there's a Category 5 storm in the financial sector, the rest of the economy is doing OK, relatively. We're not growing much, but we're not receding, either.

 SM: How have you changed your firm's investment-allocation recommendations in relation to recent events?
JD: We've made no change to our balanced account allocation, which is 70% equities, 30% fixed income and 0% cash. We continue to take the opportunity to rebalance in those accounts as the markets shift. We continue to see more opportunities in equities and less in fixed income, although safety is expensive. As this crisis subsides, we'd expect to see greater risk-rewards in equities.


SM: Everyone on every television news channel is parceling out blame today. Who deserves it?
JD: Ultimately it will be important to answer that, but I think it's way too early. This is enough of a challenge to both our financial markets and the economy to see there's more than enough blame to go around.
You can point to low interest rates, you can point to policies that wanted to expand home ownership, you can point to the expansion of balance sheets at Freddie Mac (FRE: 1.74*, -0.25, -12.56%) and Fannie Mae (FNM: 1.49*, -0.36, -19.45%), but you'll have to dig deep to get to the roots of how this started.
Right now, while it would be nice to have one individual or group to hang out there for a public flogging, our better efforts should be on getting out of this hole, rather than figuring out how we got in.
 
For those that think the 700 Bilion dollar bail would be costly, the S & P 500 alone lost 700 billion dollars in value today alone, in a one day decline. A lot of that loss is in retirement accounts.

It has now moved overseas, just like it did in 1929.

"Investors overseas were nervous ahead of the votes in Washington and after three European governments agreed to inject Fortis NV with a $16.4 billion bailout. Fortis, with has headquarters in Brussels, Belgium and Utrecht, Netherlands, is Belgium's largest retail bank.
The British government said it is nationalizing mortgage lender Bradford & Bingley, which has a $91 billion mortgage and loan portfolio. It was the latest sign that the credit crisis has spread beyond the U.S."



[FONT=Arial,Helvetica,Geneva][FONT=Arial,Helvetica,Geneva]"The weekend saw financial turmoil take its toll on European institutions. [/FONT]
[FONT=Arial,Helvetica,Geneva]The British government on Monday nationalized Bradford & Bingley after investors and lenders lost confidence in the mortgage bank, leaving it unable to fund its operations. See full story.[/FONT]
[FONT=Arial,Helvetica,Geneva]Meanwhile, financial giant Fortis received an 11.2 billion euro ($16.37 billion) lifeline from the governments of the Netherlands, Belgium and Luxembourg on Sunday. See full story.[/FONT]
[FONT=Arial,Helvetica,Geneva]The developments were "a clear reminder that the problem continues to roll on and most certainly isn't ring-fenced across the Atlantic," said Gary Thomson, head of sales trading at CMC Markets."[/FONT]
[/FONT]

http://custom.marketwatch.com/custom/earthlink-net/mw-news.asp?guid={7BBF0247-8200-41F7-956A-DB48F3727EFE}
 
Ecomike said:
For those that think the 700 Bilion dollar bail would be costly, the S & P 500 alone lost 700 billion dollars in value today alone, in a one day decline. A lot of that loss is in retirement accounts.
Click to expand...

Yeah, but my taxes aren't paying for that decline on Wall St. today.
 
IslanderOffRoad said:
Yeah, but my taxes aren't paying for that decline on Wall St. today.
Click to expand...

There is a finite amount of money, when it stops flowing and/or flows in new directions, the outcome may be that is flows away from you. The bail out is actually a long shot, as this money may not end up where it would do any good.
How much of a commodity rise would end up costing you the same amount as the bailout? Around $1.50 a day. The price of milk has gone up that much for my family in the last year.
But again it's doubtful much of the bailout money will end up where it is supposed to, much of it may just go the same way as all the rest. And actually when was the last time the federal government came in on budget for anything? This bailout is likely just the beginning.
 
My feeling--since some of the banks were able to write-off their bad debt as a one-time charge, they should all be able to. If some banks can't, then by definition they shouldn't be in the banking business.

OTOH, all economic models require capital for investment and operations. If capital dries up, the shit will hit the fan very hard. The question seems to be... will the failure of some institutional investment houses cause capital to severely dry up. I do not know the answer. It looks like a few banks have done well to position themselves already (as with those firms that already wrote down the bad debt), and there are still investors with money to invest (pension funds aren't going to put the cash under the mattress). I think it would be painful transition but we would come out of it better.
 
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