Monday's just aren't a good day for the stock market
See fundamentally the bailout might be a terrible idea. But unfortunately the markets are so emotionally driven that a bailout can help stop people from freaking out. So many large companies have relied for a long time on debt to finance their operations (now maybe long term this will have to change) but, ones that do well or have done it responsibly can handle short term fluctuations in business fine, or they eventually fail. Right now however, the panic (which may be justified) is going to f-over a lot of sound/reasonable companies.
Now maybe this experience will lead to a change in how things are done. But might as well help them from failing so the lesson can be learned without people losing their jobs. Problem with these "big companies" that no one feels sorry for - is they employ a lot of people.
As I have said before, America (and much of the world) is not facing a liquidity problem, it is facing a solvency problem.
The bailout is designed to add liquidity.
Unfortunately if there is simply not enough cash to support the amount of debt, if there are $99 dollars of debt in the American economy for every $1 of actual capital, $700B into the banks does not really do anything.
America is bankrupt and has to find a way to become 'un-bankrupt'.
Holy hell, the TSX is down almost 1,200 points so far today.
Do the Canadian stock markets have some sort of circuit breaker for stopping massive drops like the SEC does?
At least the US indicies are showing a slight increase after their early-morning drop.
I'd like to see congressmen go on TV again and explain that the American people who think this bailout won't help don't understand complex economics. So far, it doesn't seem to be helping Wall Street, which we've been told over and over again does affect every American.
I don't think the problem is that most people don't understand why Congress doesn't want a stock market crash, I think most of us didn't understand how a bailout of epic proportions was going to actually solve the problems we're facing. Throwing money at it won't fix it, there's corruption in the lending industry and that is a large part of this problem, IMO. There is no excuse for Freddie Mac or Fannie Mae to have problems. Conforming loans are supposed to have strict underwriting guidelines, more than solid ratios and are very, very low risk. There needs to be a serious investigation into those two immediately. Their failings make no sense.
I'd like to see congressmen go on TV again and explain that the American people who think this bailout won't help don't understand complex economics. So far, it doesn't seem to be helping Wall Street, which we've been told over and over again does affect every American.
That makes sense, but there are a lot of factors here. One in particular is that while the US bailout is set and approved there are issues in Europe to be worked through. I think that the bailout was a necessity and will help things more than indicated here.
The silver lining to this is that there are a lot of extremely stable companies that are falling in this mess. When liquidity is an issue, good companies get sold. If you have some cash right now it wouldn't be a bad time to put that to work for the recovery to begin in early 2009.
That makes sense, but there are a lot of factors here. One in particular is that while the US bailout is set and approved there are issues in Europe to be worked through. I think that the bailout was a necessity and will help things more than indicated here.
The silver lining to this is that there are a lot of extremely stable companies that are falling in this mess. When liquidity is an issue, good companies get sold. If you have some cash right now it wouldn't be a bad time to put that to work for the recovery to begin in early 2009.
I would tend to agree with this assessment. The bailout isn't and shouldn't be regarded as a fix to this mess. What it does is put the economy in a better position to recover by helping to free up credit. I would highly recommend that everyone watch the interview with Warren Buffett found here: http://www.charlierose.com/shows/200...n-with-warren-
He does a pretty good job of summarizing what's going on and what could be expected in the future. Right now everyone is afraid (and not wrongly so), so they're looking for the safest place to secure their money. That will eventually change, but in the short-term, this bailout really doesn't do anything to fix that. The true issue here is a loss of confidence; only when confidence in the banking system returns will this mess start to turn around. The bailout is probably the first step in the direction of returning that confidence.
Ya, you types are the one who got us into this. Trust you as far as I can throw you.
Hey, most of my clients are in cash still from January. Looked foolish in July, but the phone isn't ringing off the hook today either!
Things can turn pretty fast also. I think that there are some encouraging signs in the market, although they are largely disregarded. The Wells-Fargo/Wachovia deal is a good example of this.
If you're in already and don't need the money to live you are not in a bad spot. If you have more money you should be looking at getting in over the near future.
What would you recommend to go in on? Just a general index fund?
I currently have no market holdings but have some extra cash lying around, I figure that we could be close to the bottom I just don't have any acumen on exactly which instrument to buy.
If you're in already and don't need the money to live you are not in a bad spot. If you have more money you should be looking at getting in over the near future.
As someone with some cash that is in the process of setting up their first investment account how much liquid cash, as a percentage of assets/earnings, should one keep in a chequing/saving account as a rainy day fund?
I must add I am pretty excited about the recent market crash... compared to July my buying power just got a whole lot better
^ I don't want to tell you what to go into on a public website. I know that a few posts ago I told you to put some money to work, and I'm comfortable to say that. But I can't say exactly where to be fair to you. I don't know, I have no idea of your situation and no idea of what kind of risk you want to take here.
You have a fantastic margin of safety in a lot of investments right now though. There are some amazing values to be had. Maybe they take a bit of time, but a year from now you should be pretty happy with deals that you do now.
As someone with some cash that is in the process of setting up their first investment account how much liquid cash, as a percentage of assets/earnings, should one keep in a chequing/saving account as a rainy day fund?
I must add I am pretty excited about the recent market crash... compared to July my buying power just got a whole lot better
Well its a good idea to keep 3 months aside to cover things in most cases. If you can have more, that is better, but you do want to make sure that you can pay the bills.
I'm in my 50s and am in this business so have to deal with nervous clients. Unlike Slava, my clients aren't all in cash.
I don't really understand some of you guys. If I was at least eight to 10 years from needing my money and worked in some other field where people weren't calling me to ask about the markets, I'd be loving this market SALE. You guys should be totally ignoring your statements and piling as much money as you can into your investments. If a company or a mutual fund has done very well and is well managed and has good fundamentals but has sucked lately, buy all you can.
No sh1t, guys, buy. The missus and I scraped together $10k a week ago and invested it. Would have been better today, but hey no ones know these things. Years down the road you'll be looking back and kicking yourself if you don't do this.
Location: A simple man leading a complicated life....
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Quote:
Originally Posted by Slava
Well its a good idea to keep 3 months aside to cover things in most cases. If you can have more, that is better, but you do want to make sure that you can pay the bills.
Agreed! Something my late father pounded in my head when i was younger.
Some people don't need an emergency fund, not the traditional kind anyway. My emergency fund is a line of credit. Years ago I had someone I used to work with ask me about an EF. She had had $25k in an EF for 25 years. I calculated that she had lost tens of thousands of dollars in growth because she and her hubby had never touched it and probably never will. Both had very secure jobs and were very credit worthy. Some people are way better off putting the money into an RRSP and using the LOC instead. As I said, this is for some people, not for everyone. It depends on several factors.
