Your Take 

Your Take: What The Heck Happened These Last Two Weeks!?!?!?!

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Last week, the stock indices had both their single greatest losses and single greatest gains in the last six years. Despite all the insanity, the market as a whole lost little from Friday the 12th to Friday the 19th. We were short a few companies as Lehman collapsed and 80% of AIG went to the Feds but despite all that turmoil, the various market indices were OK. We also lost the last of the investment firms as Goldman Sachs and Morgan Stanley became bank holding companies. Oh, and did you hear? JP Morgan Chase is picking up a few pieces of WaMu yesterday.

A heck of a week huh?

What I’d like to know is what do you think about the last two weeks, what do you think about this $700B bailout bill (yeah, the one where one second there’s agreement and the next there isn’t?) and what have you been doing with your finances as a result of all this craziness?

Me? I haven’t touched a thing, fortunately I’m far enough away from retirement that I believe we can weather it. I don’t think we’re going into a Great Depression or anything like that (the central bank understands monetary policy and economics well enough to prevent that) but I wouldn’t be surprised if things were slow for a few years as a result.

As for that bailout bill? I only have eight classes of economics (that’s all I needed for that Econ double major, w00t w00t) and I am wholly unqualified to either justify or tear down the bailout bill. I understand the reasoning behind it but I don’t know if we’re going down the right path or whether we’re just signing yet another IOU. All I know is that the provision to snip the golden parachutes of executives at bail out firms better make it into the final draft. TGIF.

{ 10 comments, please add your thoughts now! }

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10 Responses to “Your Take: What The Heck Happened These Last Two Weeks!?!?!?!”

  1. Laura says:

    We haven’t changed our retirement plans either. Our goal is to keep investing on our index funds and ride it out. In terms of our household budget, we’re trying to increase our savings for a home down payment. Seeing the mess, we figure credit qualifications will be harder to come by and our goal is 20% down.

    As for the bill, I do want severance packages cut for horrible management. I’d also want some transparency like Mark Cuban advocated. I’d like to know line by line what assets the government is buying and for how much.

    I’m just trying to stick with the basics.

  2. Rick Morley says:

    You made an incorrect statement. The two institutions that have become bank holding companies are Goldman Sachs and Morgan Stanley. Different than JP Morgan Chase. Chase did buy out WaMu, but it’s not the same institution that became a bank holding company. I think Morgan Stanley used to be a part of JP Morgan Company, but no longer.

  3. jim says:

    Good catch Rick, you’re right, too much craziness… I get my Morgan’s mixed up! 🙂

  4. My take: This is simply the end of another cycle of greed. Once this cycle ends, greed will manifest itself into another form.

    My actions: I mostly did nothing. On September 17, however, when the market was at its most recent low, I decided to buy a mutual fund that invests in small-company (micro-cap) financial stocks. Small companies are not “too big to fail” and I see another wave of people finding disgust in large firms over the next few years and moving to smaller, regional-size banks. What’s more, small-cap stocks rebound faster than larger ones coming out of recessionary environments.

    With that said, 90% of my investments, and those of clients, did not change because they were already allocated for this type of market malaise. We plan in advance of — not during — challenging times…

    “Perception is strong and sight weak. In strategy it is important to see distant things as if they were close and to take a distanced view of close things.” ~ Miyamoto Musashi

  5. We’re here primarily due to the repeal of the Glass Steagall Act of 1933 and the SEC’s slack rules allowing increased leverage by the major banking institutions.

    It’s hard to say the direction of the market, but history would have us believing this is a bottom. When the markets panic, and billions are moved into govt backed securities… that’s the ultimate sign that panic selling is nearly over and the time to buy is now. Yet, this is new territory so caution is warranted.

    Like you, I’m 30+ years for retirement so I’ve maxed out my retirement accounts as much as I can. Buying opportunities like this don’t come along often, so I’m cherry picking my favorite companies since they’re selling at 10-20% discounts.

  6. Jackson says:

    I’m wondering if I should contribute to my IRA now or wait a bit and see if it goes down even more? I was also wondering if the elections will majorly affect the prices as well. Any thoughts?

  7. We’ve not changed the way we save for retirement either. But we are weighing whether we should pursue a transfer to Kentucky for my husband. We live in Florida, and we’d like to get further north (we’re not native Floridians). But we can’t help but wonder if the bottom will totally drop out of the housing market, making it impossible for us to sell our house and move to Kentucky. We bought our house before the market went so silly, and we haven’t borrowed against it, so we have some wiggle room. But it’s still a concern.

    Also, I think what has happened over the past two weeks is that Wall Street has realized with all the negative financial news, the time is ripe to go crying to the government for a handout. I personally think we need to let the market shake itself out, rather than rewarding corporate fat cats for their bad decisions and transferring all that risk to the U.S. government.

  8. Doucement says:

    I do think we are heading for a big depression. The only question is how quickly we enter it – less than a year or ten+ years? The bailout bill is designed to help with a ‘soft(er) landing’ so the recession/depression doesn’t come so quickly. It will be ugly. We are against the bailout while knowing full well how horrible things will get without it.

    I’ve been hoping it wouldn’t get this bad, but everything I’ve read in the last two years keeps going down the path of what has been forecast/foretold. We’ve been slowly preparing. Our family is by no means ready, but we are probably on more solid ground than most.

    That said, we are looking to add another small cash outlay into the stock market soon. No changes to our stocks/mutual funds.

  9. saladdin says:

    To say this is because of the passing/repealing of one act or another is short sighted to me. There are so many variables to this thing. There are so many things to blame for this I am pretty sure even ESPN is guilty.

    What about the Fed lowering rates to 1% or the Prez going on TV after 9-11 and begging everyone to go out to the malls and spend spend spend?

    The list of guilty is very long.


  10. mbhunter says:

    The bailout is business as usual. Great for the biggest banks that scoop up competitors, unload their junk, and get first dibs on a fresh round of fiat money. Bad for taxpayers and smaller banks who get to pay for it and keep all of their bad loans (respectively).

    And protecting the taxpayers with warrants is an insulting joke.

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