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OT/NT -- Economic Crisis or Big BLOW OUT Sale

2126 Views 18 Replies 13 Participants Last post by  Mik, 
S
Like most of us, I have been thinking about this current "economic crisis" and watching what people are doing and what they are worring about. I keep thinking that if you have been saving in a 401K or IRA or any sort of stock market based retirement savings plan you are still better off today than you would have been if you had been doing anything other than that. Only someone that has been in it for less than a year or two has actually lost anything!


I called my Financial Adviser (Bernice Langel, of Langel & Associates) and asked her if she would do a quick "what if" calculation for me. "What if" someone had been investing about $10.00 per week in some sort of retirement savings account for the last 5 years, what would be the value of that savings plan just prior to this melt down and what is it worth now?

First off, if that $10 per week had been stuffed into a mattress instead of a savings plan (401K/IRA/Stock/etc.) it would not be worth as much as what had been hidden in the mattress! The buying power of that cash would be less due to inflation. That $10.00 per week for 5 years adds up to $2,600.00, but inflation would have made that amount worth only about $2,300.00 today... i.e.: what could have purchased for $2,300.00 5 years ago would now cost $2,600.00. So basically, the bed bugs got $300.00 of what was hid in the mattress.

Yet, that same $2,600.00 put into a savings account of some sort over the last 5 years would have been worth about $3,200.00 at the end of August this year.

The stock market began the serious fall in September, and at the end of September (just before the really serious drop last week) it would be worth only $2,800.00.

While it may have been a loss $400.00 during the month of September, the savings account would still be $200.00 ahead of what it would have been if it had been stuffed in the mattress!

She was working only with monthly averages, so calculations for what it will be worth after this latest serious drop will have to wait until the end of October when the monthly numbers are compiled, and granted, at the end of last Monday it would have been horrible, but it is better today, so by the end of the month there is no telling what it will be.


If any toy train dealer were to suddenly offer trains at 1/2 price most of us would be all over ourselves spending money getting as much stuff as we could!

If the next day they were to lower their prices even more, would you sell what you just bought?

NO!

You'd BUY some MORE!


WELL!!!!

Right now, (in the last few weeks) the stock market has been running a "SALE" on stocks.

Remember the old adage... BUY LOW, SELL HIGH!

NOW is the time to BUY!

We all know that automobile sale advertisements are bald-faced lies, but to parrot the way they hawk their wares...

IT'S A YEAR END BLOWOUT!
LOWEST PRICE THIS YEAR!
NOW IS THE TIME TO BUY!
PRICES WILL NEVER BE LOWER!
HURRY, SALE ENDS SOON!
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SteveC
Charles

I'm not so sure that anyone as yet, is willing to go out on the proverbable limb and say that it's time to call on the "Fat Lady" to do her thing. Personally, I don't think this thing has gotten any where near running its course, yet.

Then there's the nasty detail, of just what to actually buy, since nobody really knows for sure just how much of anyones worth is actually backed up by those "Toxic Assets."

However, if one had some money that if totally lost wouldn't place you in jeopardy and were of a gambling nature. Then you might have a really good chance of increasing your wealth, providing you also had the time to wait for the return on your investment to come about. The stark reality is, however, the average individual just doesn't have that "extra uncommitted cash" laying around that they can afford to totally loose.

I mean look at what Warren Buffette stands to gain, from the $5 billion investment in Goldman Sachs. and the $3 billion investment in General Electric, but then again he's also in a position that he could totally loose the whole $8 billion and still survive with no problem. And that doesn't even take into account the option to buy an additional $3 billion of Goldman Sachs common stock at $22.25/share at some time in the future, which was part of the original deal struck for the $5 billion.
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TonyWalsham
By all means buy low and sell high.

That theory works just fine as long as you buy at the nadir of the market.
I don't think the low(est) point of the market has yet been reached.
The trick is going to be determining that lowest point.

A good start will be made when the crooks running the rating agencies that gave the toxic investments AAA ratings, are brought to justice.
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John J
Buy Low Sell High is probably a great concept.

How ever.....When things are this low who's got any money to buy
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TonyWalsham
JJ.
The answer is: those that sold high after buying low.

Who are those you might well ask?

Usually those in the know. It is called insider trading and is a big part of the problem.
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G
these last weeks i learned just one thing: either i am dumb as a stone, or economics have nothing to do with logic.
the US inflates the money by 8,000,000,000.00 greenbacks, but the dollar rises in the change rates.
gold falls, but there is no gold on the market, one can buy....

i filled my deposits with food, just in case....
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W
There is a very important part of this that has been over looked. That is: "Buy low, sell high, and marry bread." I would love nothing more than to make this my motto, but my wife has her own opinion on what my mission in life should be.
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Torby
If I had some cash, this might not be a bad time to jump into the market.
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R
Guys,

Was my broker the only one to say that when you get in to the 60's you should have most of your retirement savings in insured saving.. I beleive he said 1/3 in the market & 2/3's in some thing safe.. Are we getting greedy??

BulletBob
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Pete Thornton
While I agree with the sentiment (Buy Low, Sell High,) you still have to figure out when it is low and when it is high!

A comment on retirement accounts - I suspect half the volatility is caused by the big funds (e.g. the S&P Index Funds) having to sell stocks as many people are 'adjusting' their portfolio to reduce their exposure to the stock market. If everyone would just relax and let things settle, then we'd all be worth a bit more!

Final comment in the same vein. My wife is freakin' out about the fact that the market is down 20%+, but in fact her IRA is still only down 10-15% as she has only 55% in stocks. It's called a balanced approach.
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aceinspp
Well things are low so buy buy. Later RJD
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TonyWalsham
Posted By aceinspp on 10/18/2008 3:54 PM
Well things are low so buy buy. Later RJD

There is no point buying in a falling market until that markets gets to the bottom.
If you did and it fell further, you would still be losing out.
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jfrank
When the stock market crashes and housing prices go in the tank and people go bankrupt, they quit buying. Companies lay off more people and then more people quit buying and then companies lay off more people and.................................... Where does it end, that is the question. The so called experts now think it will be short term because of all the money the Feds have dumped on the market. But in 1929 no one knew they were in the Great Depression and it didn't hit bottom until the early 30's when we had 25% unemployment and it was up to the history books to conjure up the term 'Great Depression'. Traders(snake oil salesmen) are hawking the so called bargins, but they are basing it on current corporate earnings. What will future earnings look like if the economy is in the tank? No one knows. But for sure, if corporate earnings decline then so will their stock prices. I wish I had the crystal ball, but I am retired so I am keeping my money in fixed income savings until further notice. The one bright spot if you have savings that have not been wiped out by the crash, there will be bargains to be had everywhere, from houses to autos to TRAINS. Just keep your eyes open. When people get desparate they start dumping things at fire sale prices.
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Mik
Sure, I'll buy. What do you have for $6.39? Cause THAT'S all I gots to my name.

Damned hard to save that $10 a week when your expenses on NECESSITIES equal or exceed your income. What do you cut to GET this money to save and invest? Milk for the kids? Gas to get to work every other day? Turn the thermostat OFF 3 days a week all winter? I know, I'll only rent my apartment 29 days a month!
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Torby
I've always thought recessions were caused by accounting ;)
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xo18thfa
We are getting in now, building over the next few months. High dividend stocks and beat up bonds. This is a once in a lifetime opportunity.

Taking the risk, Bob
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Dennis Paulson
The ' stock market / Wall Street ' does not print money , they do not even make toothpicks , so if someone makes money on Wall Street , that means someone LOST money on Wall Street or stocks , or invested their money in the shell game of which one has the pea in it .
Any money made at Wall Street .came from some investor because they do not print the money there .

Fleece the Flock , its there and easy to do .
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John J
I heard on some talk show that there is a guy with a big sign walking up and down Wall Street and it sas "JUMP YOU SOB'S JUMP"
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Mik
Posted By John J on 10/19/2008 2:52 PM
I heard on some talk show that there is a guy with a big sign walking up and down Wall Street and it sas "JUMP YOU SOB'S JUMP"

In modern buildings the windows don't open...more's the pity.
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