Posted on 09/29/2008 5:42:09 PM PDT by 2ndDivisionVet
Rather than panic, follow these tips to pass the time wisely while Congress gets its act together and approves a financial-bailout package.
While Nancy Pelosi is blaming our financial meltdown on Republicans, and Republicans are getting even by voting down the $700-billion financial-bailout package -- and while panicked investors react to the congressional backstabbing by sending the Dow Jones industrial average down a frightening 778 points -- I get an e-mail from my friend Clayton.
Clayton is about to retire. He lives in a small city in the South and figures he could live comfortably the rest of his life on his savings, which are mostly in the stock market. Now Clayton is beside himself that his savings are being set afire by the dithering politicians.
He asks me what to do -- sell everything is his preferred course of action. The way stocks of good companies were being thrown out the window on September 29, a lot of people felt the same way. Maybe you are one of those who also think the world is ending.
I agree -- it's hell to sit still while the world ends. So I am going to suggest six things you can do, right now. Sensible things. Constructive things. You'll stay busy and time will pass faster. By the time you've finished these six tasks, I predict, Ms. Pelosi and the House Republicans will have resolved to behave better and passed the legislation.
When the Senate does the same and this bailout actually occurs, we'll all feel much better. It may even solve a problem or two. So here's what to do.
First, do anything, but do not look at your investment-account balances. What you see would just upset you. Take a long walk instead. The thing is, now is not the time to lose your cool completely and sell assets that you thought were good investments a week ago. They undoubtedly still are good investments.
Second, if you ignore my first suggestion and look at your account balances anyway, you may discover that you are not fully invested. Maybe there's some cash in your accounts. Cash gives you several options. One of them is to make a lot of money in a really safe investment, like a money-market fund.
When the Reserve Fund, the nation's first money fund, "broke the buck" two weeks ago and repriced its shares at 97 cents instead of the usual $1, institutional investors in particular began a run on money funds. To stop mass redemptions, the government took the unusual step of offering to insure money-market funds, including tax-free MMFs. As I write this, Alpine Municipal Money Market Fund (symbol AMUXX) is showing a seven-day annualized yield of 6.51%. For someone in the 35% federal tax bracket, that's the same as a 10% taxable yield. Ladies and gentlemen, I've never seen low-hanging fruit of this sort. Alpine says it is considering buying insurance on this fund.
Third, maybe you looked at those account balances and are outraged -- yes, made madder than hell at the disrespect other investors are showing the great companies whose stocks you own. That's exactly how I felt. The first thing I did on September 29 was sell a stock that had barely budged that day but that I had no great feeling for anymore, to raise more cash. Then I used some of that cash to double up on two stocks -- one a bank, the other an energy provider -- that had been beaten to a pulp. But I held some cash in reserve, because there's always tomorrow.
Fourth, maybe you looked at those account balances and found cash on hand, but you don't like the idea of 10% money-market returns or doubling up on stocks you already own. Maybe you're one of those people who smell an opportunity to own new positions in really good stocks at bargain prices. If so, you don't need to read the rest of this commentary because you don't really believe the world is ending, do you?
I note that Microsoft (MSFT) lost almost 9% of its market value on September 29, closing at $25.01. In other words, you are being offered this stock at a 9% discount to its already discounted price. This is a company that accumulates tens of billions of dollars a year in cash, which it throws back at shareholders in the form of higher dividends and larger stock buybacks. What's not to like about that?
International Business Machines (IBM) saw its price decline $5 a share, to $114.46. That's less than 15 times its earnings the past 12 months. The mighty Burlington Northern Santa Fe (BNI) took a 7% hit, to $91.04 (disclosure: I own shares of this railway). Great companies are on sale! Perhaps you should be a buyer.
Fifth, get a haircut or a manicure. By the time you get there, get it done and get back, you'll have killed at least an hour. You'll look better. You'll feel better. All the more time for Ms. Pelosi and the House Republicans to reconsider their actions.
Look, it burns me up, too, that we taxpayers are risking $700 billion to undo the poor judgments of the mortgage lenders and investment bankers whose excessive greed got us into this fix. But we've got to get the rotten fruit out of our financial orchard or we'll be in an even worse fix tomorrow and the day after and the day after.
Which leads to my sixth suggestion: Think nice thoughts. Think of trout jumping in a stream. Think of the last really great meal you've eaten. Think of the thousands (more likely, tens of thousands) of investment bankers and mortgage brokers who are out of work today, and of how our country is so much safer as a result. Do anything, but don't sell your investments today, at the bottom, in a snit or a panic. My friend Clayton is holding steady. He e-mailed me just now to say he's staying the course.
I am going to take the advice of Michelle Malkin and just spend all the money I have and when I graduate default on all my college loans, because someone will be there to lend a helping hand.
I am not a financial genius, but I always thought the closer you get to retiring, the more you want your nest egg in something like bonds.
Should I feel sorry for someone who is realizing the risk inherit in the stock market?
I for one won't be opening my 401k statements for about 5 years.
The world did not end today. Yes, the market took a pretty nasty dive, but it will recover more quickly if we don’t allow Congress to once again put its nose in and “help.” The market will correct itself. Oil is down. Dollar is up. We just need to ride this out and let the teetering institutions fail and capitalism will prevail. We must continue to say no to this Socialistic bail out in whatever form comes next.
The first thing Clayton should understand is that the closer you get to retirement, the more cash or other guaranteed-income securities, like CDs, you should have.
Meanwhile, the Steelers and Baltimore are on right now.
Let this house of fake profits fall.
Every honest system will benefit.
Fannie and Freddie made this mess, let them die with it. If investment businesses or banks relied on them, let them die as well.
The first rule of the “Hitch Hiker’s guide to the Galaxy”:
DON’T PANIC.
Brilliant man, Douglass Adams. Brilliant indeed.
DON’T PANIC!
Spend a lot of hours downloading World of Warcraft.
Vent mightily on the monsters you find there. Pretend they are all demonrats! Get to level 70 ASAP. Then go nuts on the castle!
I have been yelling at the tv for days......investments are not ‘safe’, they are inherently risky! I understand that people don’t like losing money but sheesh!
Amen. Obama is pulling away. Everyone is blaming Republicans for stopping a bail out. Unfortunately, no one has made a coherent case for limited government over the past seven years. Lyndon Baines Bush and Karl “Mark Hanna” Rove thought they could spend their way into a “permanent Republican majority” (remember that? I just laugh when I think about it). So they gave up on a critical pillar of the conservative movement—stopping spending—and thought they could get by on social issues. It didn’t work and now we are facing disaster. We’re in for a rough four or eight years.
The only way to stop this is 100% reserve requirement for all banks etc. No more credit out of thin air.
Turn it off. It's mostly Dem/Lib lies anyway. I quit watching teeheeheevee news in the early 80s, and haven't missed a thing.
Do what people do in Socialist countries. Hoard gold. You can always use it to buy passage on a boat out.
If you are contributing above your employer match level, perhaps you should put the rest into something with tax free gain, like insurance.
Maybe the markets are finally getting around to discounting Vista as a certain type of sandwich..
Like Lehman bonds, AIG GICs and WaMu CDs.
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