DONT PANIC!!! — A fresh look at the financial crisis.
2 October 2008Trent over at The Simple Dollar has the following observations of the current financial crisis:
The panicked talk, the whispered statements about apocalypse - they’re fear. Nothing more, nothing less.
I don’t claim to know what the “best” plan for resolving the situation is. My level of information about the true nature of the economic situation is extremely limited - and so is yours.
I’ll tell you what I do see, though.
I look out my window here in Iowa and I see the ongoing harvest of one of the largest soybean and corn crops ever - not the cropless Dust Bowl of the 1930s.
I don’t see a single person with a bank account that has lost their deposits, like my grandfather’s family did circa 1932.
I see people going to work, working hard and producing value for their wage, coming home, and buying the things that they need to keep their family going, which puts money directly into the economy.
I see unemployment barely over six percent, not the 25% rate at the time of FDR’s address.
I see industrial production still rising - in 1932, it had fallen by more than half in just three years.
I see a dollar that’s actually strengthening, not weakening, while the price of oil is down sharply from its highs earlier this year.
In short, I see a lot of things that make me optimistic about our ecnomic situation, a pretty stark contrast from the fear being peddled by some. I’m actually much more reminded of 1987, when banks were failing thanks to the Savings and Loan crisis and Black Monday, when the Dow dropped 22% of its value in a single day. We haven’t yet seen anything as worrisome as that, in my opinion - and that was just a drop in the bucket compared to the 1930s.
To put it simply, I’m still not worried a bit, and when I see the fear being bandied about, I’m reminded of FDR’s words.
So what have I been doing with my money as of late?
First, I haven’t taken a dime out of any bank. I haven’t seen any FDIC-insured bank account fail, and none have in the history of the FDIC.
Second, I actually maxed out my Roth IRA contributions earlier this month. Almost all of that money went into broad based index funds - namely, Vanguard’s Target Retirement 2045 fund.
Third, I haven’t made a single change in any plans I’ve had for investing other than the early Roth IRA buy. I’m still following my own game plan.
Now, ask yourself this. If you make any irrational moves, like pulling all of your money out of stocks, does someone profit from it? Of course they do. Your brokerage will make a fee from the sale, and a happy buyer out there will be glad to buy that stock from you at a nice discount. Fear is the best salesman, after all.
My sole piece of advice to you is this: don’t panic. Don’t make any hasty decisions. Sit back and get informed$3 billion in General Electric stock and $5 billion in Goldman Sachs stock (an investment bank … weren’t we supposed to be afraid of those?) - he sees this current situation as an opportunity to buy, not sell. - and don’t just rely on one source for information, either. Get a bunch of different angles on what’s happening, from liberals and conservatives and moderates alike. If you’re worried about your money, do your own research and find out reasonable things to do with it. Take a serious look at what people who really know what they’re doing are doing with their money - in the last two weeks, Warren Buffett has invested
Fear …people feed on fear… the media produces fear. Just look at the rush to the gas tank here in Nashville due to the Hurricane Gustav. The media caused everyone to rush to the gas station and causing them to run dry for no reason.
So be smart and relax … the economy will right it self like it has.
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