Market in Freefall

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chapelgrovefilms said:
Anyway, I keep hearing this theory that eventually the junk mortgages will have value again, and the taxpayers (i.e. the government) could even make a profit. If that's true -- if they really believed that -- then why bail out the banks at all? Let them wait for the profit potential to resurface on these mortgages, and cash in then. .
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I'm not an economist but the conventional wisdom is that this financial crisis has frozen credit. The global economy MUST have credit to sustain, even at the lowest level. For example, a small production house with 20 employees might need a line of credit to meet their payroll, they've got projects lined up but they're 3 weeks away from getting a check--they're between jobs as it were. Uh oh, no credit from the bank, so 7 employees get laid off. Now seven people buy less groceries, don't patronize the local pizzaria, ooops they can't pay the rent or make the car payment. Cars are repo'd, landlords can't make THEIR car payment because a certain former production house employee didn't pay his rent. And so it goes.

Credit is perfectly accepted instrument of the free market, a cash only/pay as you go economy doesn't seem to be something anyone considers. Credit is fine provided it's managed. The trick is finding that happy balance between regulation and free market. Right now most would say we strayed too far toward an unfettered market.

The economists are saying the US economy's fundamentals are for the most part sound, but there's a psychology to economics and the concern is panic, which in turn could cause bank runs, dumping stocks, things like that could create an economic death spiral.
 
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No, the "Empire" is not going to fail. Most of the problem is the fact that people are overreacting and panicking. We are bailing out people in ways we shouldn't and people are taking there money out of fear which only aids the problem. Things are a lot different now than they were in 1929 and the economy will level itself out. Drastic measures and reactions are only aiding the problem. America is not going to collapse, but it will be tough for a while.

Now, before I say something political (because I am quite fired up over this) I am going to bed...
 
There is nothing political to be said. And I would hate this conversation to turn to that.

But really - it is at a point where there needs to be a bailout. Investors, for the most part, aren't intelligent. They bid where they can. That is why people lose money day trading. They don't know what they are buying. Most of the time, I buy when it starts heading up and sell minutes later. Minor gains.

But the market adjusts so fast, most people - even when going through a broker - still lose. Because they see the red arrow pop up. And the little graph making a move down they get nervous. As they rightly should. So they put in a request to sell. Of course - the sell needs a buyer. So volume is important here too. That request goes through the broker, to the trade floor, and minutes later you get an answer back. By this time others have done the same. The share price goes down. This fuels the selling of others.

So unless you have a direct trade - it takes a while. The market is fueled by confidence. When the bailout was rejected - people got scared. Wachovia lost anything they had today. The market is such that it won't be corrected by what we do. The foreign markets took a slam. And for the most part - everything lost in the afterhours trading. Which means tomorrow will open with stocks low, and the market will adjust and react for the loss in world shares.

The market needs help. Look at Apple. It took a huge beating today due to investor fears. 52 week low. The drop started after we talked about the health of Jobs. It's small things that trigger selling sprees.
 
There's plenty to be said political, but definitely not here.

I wonder how much of the 'frozen' credit is just banks waiting for a handout from the government, and doing what they can to encourage it. If it becomes clear that no handout is going to come, I wonder what the banks would do then.
 
Mattykins said:
The market needs help. Look at Apple. It took a huge beating today due to investor fears. 52 week low. The drop started after we talked about the health of Jobs. It's small things that trigger selling sprees.
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So Apple is lower TODAY than it's been in a year. So what? Where will it be a year from now? Two years? Ten?

Investors have to stop focusing on today, and look ahead. The market is intended to be a long-term investment vehicle, not a 'make a fortune today and get out' proposition.
 
chapelgrovefilms said:
So Apple is lower TODAY than it's been in a year. So what? Where will it be a year from now? Two years? Ten?

Investors have to stop focusing on today, and look ahead. The market is intended to be a long-term investment vehicle, not a 'make a fortune today and get out' proposition.
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YES.. you got it! Everyone want's to be rich overnight and live beyond their means these days. That's how we got in this mess.

For the young guys, this is the opp of a lifetime. You should be setting up IRA's in a good diversified fund & buying! Now's the time IMHO.:beer:
 
David,

If you have a portfolio - take a look at it right now. See how you feel. I haven't assessed my damages yet in my mutual funds - which I have for the "long term" as it were. Really - not much I can do there.

My Roth is set up - if I could add to it - I would. But the thing is, the market isn't really built for a long term investment. Well - by definition - it is. But not really.

Apple is down today a lot, and it's huge. It means the investors are worried of a scale-back in those using computing technologies and that competition is on the rise with high costs of Apple computers and Ipods, competitors are making a run at apple.

You mean to tell me you would be feeling fine and dandy as your stock dropped 22 points? And hovered around 100 dollars earlier today?

Wachovia was just purchased by Citi. It's done - game over. If you had stocks in Wachovia and held onto them simply because it is a long term vehicle and thus it should not be touched? Guess how much you would have lost? 10 points to 1.8 in two days. And soon - it will be gone entirely.

You need to trade to keep abreast of the changing market. Sure, few don't get rich quick. But it took us 6 years to make back what we lost after 9/11. We held onto it. Many didn't. Tomorrow doesn't matter for many. When you see your money going away - you get scared. Since now, a drop might mean the end of the investment.

Thus - people sell. It may be a long term deal. But the reasoning people sell isn't due to stupidity.
 
I'm not worried where my 401k is today. I'm worried where it will be when I want to retire. By then, this will be a memory. Unless we screw it up royally.

That's what I'm saying -- people freaking out over where things are TODAY are making it worse. We need to be patient. It's the same as people freaking out because gas is in short supply here in the southeast. They're topping off the tanks on all 3 of their cars and filling up their gas cans, when it's completely unnecessary. They're making the problem WORSE out of fear.
 
What if you were looking to retire this year, or in the next few years? Then it's not all worrying about today when you should be looking at the future. Plus what if when you do plan on retiring your 401k has just recovered back to what it was just before all this happened, then you've made nothing from now to then. Things are bad right now.
 
Yes, like I said earlier, older people are going to suffer more than younger folks. And that includes me. But I'm not sure a $700 billion government debt giveaway is the solution.

Again, we're the ones who got ourselves into this mess. Is it fair to expect our children and grandchildren to suffer the consequences?
 
Look I don't agree with you but I don't want to start pointing fingers at who's fault it is, because that'd be a political debate which we know isn't allowed here...
 
Kubrick71 said:
What if you were looking to retire this year, or in the next few years? Then it's not all worrying about today when you should be looking at the future. Plus what if when you do plan on retiring your 401k has just recovered back to what it was just before all this happened, then you've made nothing from now to then. Things are bad right now.
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A balanced and well managed 401K would mean that as you approached your retirement age the plan would have less dependance on stocks and more on bonds or other more stable and less risky investments. Those who did not rebalance their plans are the ones that lost.
 
I will have to disagree that a bailout is necessary. It is not the taxpayers job to pay for a failed business. The problem lies in the mortgage companies. They overextended. I believe the only requirement to get a loan was that you had a pulse! Now, all joking aside, the bailout would not have helped people. There were not NEARLY enough restrictions in there, it was basically like handing out free money. This is a result of corruption on several levels in the companies. And, as far as the stock market, just because it drops does not mean our economy is going down the tubes (although it is) all it is is a measure of people's FAITH in the economy. People panic and things go awry. But, unless you have money invested in stocks, the drop is not going to affect you directly until it convinces more people to panic and send us into economic destruction.

I have more to say but I am tired of dwelling on this matter...
 
ConspiracyPenguin said:
I will have to disagree that a bailout is necessary. It is not the taxpayers job to pay for a failed business. The problem lies in the mortgage companies. They overextended. I believe the only requirement to get a loan was that you had a pulse! Now, all joking aside, the bailout would not have helped people. There were not NEARLY enough restrictions in there, it was basically like handing out free money. This is a result of corruption on several levels in the companies. And, as far as the stock market, just because it drops does not mean our economy is going down the tubes (although it is) all it is is a measure of people's FAITH in the economy. People panic and things go awry. But, unless you have money invested in stocks, the drop is not going to affect you directly until it convinces more people to panic and send us into economic destruction.

I have more to say but I am tired of dwelling on this matter...
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All I know is the last time there was a crash after 9/11, I lost my job a week later as a direct result. The investors told the higher ups they had to make cuts and that was that...So this drop will affect people. Directly.
 
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