Another down day
Posted by Frugal on June 18th, 2008
Markets are going down. What’s new?
If you haven’t got out, I must say that I’m sorry. Because it’s probably going to get uglier before it gets better. The headlines is filled with bad news. Earning is down from Fedex, Goldman Sachs, Morgan Stanley, Fifth Third Avenue, etc. Home depot, and Walmart are cutting down expansion. Banks are facing to bring even more level 3 assets back to their balance sheets. It’s amazing that stock markets have not collapsed. And I don’t think the Plunge Protection Team will be able to save the stock markets at all, unless PPT is ready to monetize and buy up the market.
I should be shorting more. Unfortunately, I have been too busy with my work. Only shorted enough to make peanuts.
There is definitely a second wave of liquidity crisis going on behind the headlines. No one is talking about the big elephant in the room, until the greedy brokers get out before their clients. I am now expecting Washington Mutual, Indymac Bank, Downey Financial to probably fail and taken over by FDIC, unless a suitor comes along. Everybody in financials is drowning however. Whethery they go down along or go down together, the results are pretty much the same.
Good luck. Hope that your portfolio doesn’t get whacked. And I know there are people who are advocates of buy and hold and index funds. Wait until 2011 and see if they will be even smiling. The down wave going towards 2011 is going to be the biggest down wave seen in the last 50 years probably. Only 1929 will be comparable to the current situation. Modern finances have improved a lot. So I don’t expect people’s lives to get destroyed like in 1929. However, it doesn’t mean that you won’t lose BIG money.
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June 18th, 2008 at 10:35 am
I have over 100K in mutual funds that I got from an inheritance. I have never played the market much but have been learning for the past year or so. I really thought about pulling most of my money out a couple weeks ago, but did not. I was hoping securities might go up temporarily if oil went down… Would you still recommend getting out now, or do you think there might be a better opportunity in the near future. Also, do you have any idea of when you are thinking about getting back into the market? I know I’m naive, but I already wasted money buying into an middle of the line mutual fund and I don’t like the thought of loosing a lot more if a slumping economy is so predictable. Thanks.
June 18th, 2008 at 8:27 pm
I’m not worried about it.
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June 19th, 2008 at 12:00 am
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June 19th, 2008 at 9:20 am
Dear Frugal, I am in the same situation as Joe (1st poster above). Mutual funds are all tied back to stocks anyways, so is it better to pull out now and park the money in bonds until things get better?
What do you recommend the non-traders (the buy and hold folks) and long term investors (incl. 401k holdings) do to avoid this current economic crisis?
Thanks in advance for your views.
June 19th, 2008 at 11:57 pm
Mike/Joe,
The above is obviously solely my personal opinion. I can’t advise everyone individually. However, my personal belief is that markets may fall probably 20% from here. There is still a non-zero chance of markets going up towards the first quarter of 2009. If that happens, I think it should be a good time to sell. Furthermore, if stocks go into hyper-inflationary spiral, it may make nominal high too.
Unfortunately, no one can predict the future with certainty. Personally, I’m holding very high level of cash, either in retirement accounts or taxable accounts.
You really have to decide for yourself whether to get out or not at the current level. I’m guessing the 2 trading days just before July 4th may be a good time (since markets “usually” go up before a holiday). Of course, we are in an unusual time. Not sure if that applies.
Best luck.
June 20th, 2008 at 7:02 am
I appreciate you comments. Thanks.
June 23rd, 2008 at 10:19 pm
Hey Frugal,
How solid is that bankruptcy call on Washington Mutual?
Thanks,
James