Anyone scared about the economic crisis?

[aimeecc]

I didn't see any threads on it, but maybe I'm blind.

So, in a nutshell, Bear Stearns went for a pittance, the market continues to plummet, loans are getting harder to get...

I have a secure job. I have savings. But I'm worried. We have some $ in mutual funds that are declining, so we are thinking of pulling it all out before its worth nothing. Better to pull out now and loose $300 than to hope it will recover and loose even more.

I can't even find a decent CD offering more than 3%.

My hubby and I were going to buy a home, but decided not too. Markets still too unstable (CNN listed greater DC area in the top 25 locations to continue loosing real estate value, estimated 20% decline over the next 5 years - actually, it was #10). Also they want 10% down - which would take all of our savings. And I can't get a loan lower than 5.925 - and that one was an ARM, interest only, with 10% down! Talk traditional, and its more like 6.5%!

I'm really worried about this recession. I can only imagine if I didn't have job security or savings how I would feel. I worry about my brother - he in construction.

Anyone else scared?

[Happy Monkey]

I paid 6.625% and about 10% down in DC 8.5 years ago, and that was an excellent rate at the time.

Of course, it was 6.625% and 10% of a much smaller number than it would be today.

[aimeecc]

My last mortgage (my first one) was 6%, no $ down. It *was* 5.75%, but since I was naive I didn't realize the home would close late, it was raised by a quarter point for going beyond the 45 day lock or something like that. Lesson learned.

I just can't believe with our credit history and score we can't get a better rate.

[glatt]

Not here.

My job seems to be secure. We are very busy now, and have a remarkable amount of business heading our way in the future. The next year is looking very busy. We're having trouble hiring enough qualified people.

As a consumer, stagflation would be no fun, but we could tighten our belts and make do just fine for a couple years.

The market is run by a bunch of over-reacting nervous Nellies, and it's a shame. I don't like seeing my 401k go down as much as it has, but I'm still 25-30 years from retirement, so this is no big deal.

The only thing we have to fear is fear itself.

[aimeecc]

Originally Posted by glatt

The market is run by a bunch of over-reacting nervous Nellies, and it's a shame.

I read these articles that go something like this:
"The problem with the market is consumer confidence is eroding. The market is going to continue to plummet. Consumer confidence is gone. It wouldn't be as bad if there was consumer confidence, but the sky is falling and people need to bail out now but the problem is consumer confidence. Buy gold now, put all your money in safe saving but the problem is confidence."

Ok, so you tell me the problem is our confidence level, but then tell us the sky is falling? Its hard for consumers not to loose confidence and overreact.

[HungLikeJesus]

We've been very busy for the last six years, and I don't see anything changing. If anything, there are more job opportunities now then there were when I graduated in 2002.

If you've done a fair job of saving, you should be able to ride out a short bump in the economy.

[aimeecc]

I worry about my retirement investments, my sons college savings investments... all tied to the market.

But I more worry about the US as a whole. I worry that more people will lose their jobs and lose their homes and not have health care. Its going to further the divide between haves and have nots. GWB seems to not care about the economy. It seems the more the fed tries to help the worse it gets.

And I have yet to understand, beyond greed, why gas prices keep rising. In the fall it was because of winter heating costs. Now its spring, and the prices are being raised because people are going on vacation. Come summer it will be raised again because of cooling costs, then right back to winter where it will be raised again for heating costs. Ok, when is it going to go down? If its spring and heating costs go away, why doesn't it decline? I know, a rhetorical question. Its because of greed. But how long can we keep paying these prices at the pump?

[barefoot serpent]

Originally Posted by aimeecc

I didn't see any threads on it, but maybe I'm blind.

So, in a nutshell, Bear Stearns went for a pittance

BSC @ 6.47 today

JP Morgan got her for 2. Now that was a deal...

Hopefully The Fed is on top of things. To whit: I'm guessing that The Fed forced BSC to be sold this week to prevent the 'surprise' coming later after a recovery had already begun.

[HungLikeJesus]

aimeecc - it's not just greed that is keeping the price of energy where it is (it's still not high, just higher than we've been accustomed to). Here is some more information.

[TheMercenary]

Originally Posted by aimeecc

I didn't see any threads on it, but maybe I'm blind.

So, in a nutshell, Bear Stearns went for a pittance, the market continues to plummet, loans are getting harder to get...

I have a secure job. I have savings. But I'm worried. We have some $ in mutual funds that are declining, so we are thinking of pulling it all out before its worth nothing. Better to pull out now and loose $300 than to hope it will recover and loose even more.

I can't even find a decent CD offering more than 3%.

There are people here who are finance experts, I am not one of them but I do invest and understand the market and how it works. No offense but you would be a fool to pull out and cash in any investments at this time. The only people who loose out are those that cash out when the market plumets. History tells us that it will come back up no matter how low it goes. Just relax and don't panic. If you have a regular investment withdrawl each month let it go and do what it is supose to do, buy more when the market is down so when it comes back up you will gain. Hang in there. The people who need to worry are the ones who have to withdraw money to survive, ie. fixed income retirement accounts, or those who were planning on retiring this year, or needed to withdraw (with a plan of action) this year and were planning on using the options to do something specific. I may be wrong but do nothing at this point.

[aimeecc]

I am definitely not an economic or financial expert. I save each month, invest into mutual funds each month. My usual is to not think about it.
But I did stocks a few years ago. Ok, like over a decade ago. I went with 3 big companies - Intel, Johnson and Johnson, and Mellon (now Bank of New York). I invested monthly for a while, then stopped. I didn't even watch it - just let it "grow" was my thinking. Well, it never grew. I think I made a very slight profit on two, lost on one. I finally sold it all in November to put in mutual funds.
So my experience is that if I wait, it will stagnate and not grow. So now I am worried that its useless in these mutual funds and I should go with something guaranteed - like a CD or money market. But those interest rates are pitiful now.

[lookout123]

I don't know you or your specific situation so I cannot advise you on a specific course of action for your finances. That being said, CD's are the 3rd worst choice for long term money. (cash and money market go 1st and 2nd). Long term investors belong in equity mutual funds unless they have the risk tolerance and the assets to move into the individual equity markets. If you don't want to work with a trusted advisor and don't have the time to study your options carefully, look at some asset allocation plans offered by the major fund companies.
Look for:

-performance over 3,5,10 year time frames. Look for consistency, not stellar numbers.
-how long has the management team been there? Are they responsible for the performance?
-What was the best 12 month period the fund had? The worst?
-Cost? Sales load, annual expense, waivers, etc.

You're young. Pick quality investments and hold them until either YOU change fundamentally (retire, learn more, etc) or THEY change fundamentally (Management change, Prospectus change, Performance abruptly changes over 1-3 year periods.) Do not change investments based on the current state of the market.

Traders trade, investors buy and hold. Both work but they require different temperments and skill sets.

[aimeecc]

BTW lookout, thanks for the answers (both the long 1st one and the latest one). As I have said, I am no financial expert so I appreciate it when its in terms I understand.

Yes, I have time - both for retirement and little ones college. The funds I picked had good 3, 5, and 10 year returns. Low overhead. I didn't go with one of the huge names, but with my tried and trusty bank that at least makes the top 25 and has good reviews from Morningstar - 4 or 5 stars for all my funds from them. I like the ease at which I can access my funds, and not have to pay for trades (unlike Fidelity and others). I have 6 funds, and all but one have had a really crappy year. Of course, that can be said of the entire market.

I do have a doomsday cold war mentality. Both me and my husband. Our dream is to have a large tract of land with water so when it becomes anarchy from global warming and the mismanagement of the US we have a safe haven. With clear fields of fire. And ground radar to detect any movement on our property. Some place we can stay for 20 years without ever coming out until we need to kidnap a bride for our boy. lol.

[tw]

Originally Posted by aimeecc

I am definitely not an economic or financial expert. I save each month, invest into mutual funds each month. My usual is to not think about it.

ETFs were created just for you. Either invest in an entire industry (ie financial, semiconductors, retail), or invest in the S&P500, Dow Jones, FT1000, etc. Invest without an up to 2% charge for the industry professional who historically underperforms the market. You paid someone to run that mutual fund and what happened?

Index funds are mutual funds that remove the expensive professional and therefore outperform other types of mutual funds.

ETFs are how to invest just like an index fund usually with even higher returns. If you make 8% but pay the professional 2%, then what have you done? If you lose 4%, you still pay that up to 2% to that professional. Reality was stated bluntly by The Economist on 1 Mar 2008 entitled "Money for old hope: A special report on asset management" and quoted in Post 20

If you don't have complex tax problems. If you don't have a $million to invest. Investments that require little attention without those massive service fees. As The Economist said, "The fund-management industry has done very well - but mainly for itself" and "But whereas the clients have not always done particularly well out of the industry, the providers have prospered." Could they be any more blunt?

This is an excellent time to make decisions for your future. You would pay service fees to a professional who typically underperforms the market? Welcome to mutual funds that, "persuade their clients to select their funds on the basis of past performance, even though there is little evidence to show that this is a good predictor of future success."

Those who don't watch their investments are best advised to invest in indexed mutual funds without the expensive professional - without those expensive fees. Or buy a stock (called an ETF) that does same without the major expense of an industry professional - designed for investors such as aimeecc. ETFs have many names such as Spyders and Powershares. As the Economist noted, ETFs are the Wal-marts of investing. They were created for people who want higher returns and do not watch the market.

Industry professional don't like these ETFs because those service fees instead appear as profits for the investor.

The Economist was quite blunt about it:

Hence the clients get engaged in a costly game of chasing the best performers, even though by definition they are bound, on average, to lose it: after costs, the average manager inevitably underperforms the market.

If you are not managing your investments, then ‘Wal-mart’ your investment in index funds. Even better than indexed mutual funds are stocks called ETFs. Eliminate the biggest expense that also historically underperforms the market - the expensive fund manager.

[Undertoad]

The prices are smoothed out in the futures markets. You can buy a barrel of heating oil for next heating season, today, at a lower price than you can buy oil for right now. So if something happens in July that will increase the price, the price to the end consumer will rise based on more than just supply, and won't just fall back down either; it'll crawl back down. Speculators buy futures based on everything that drives any market, including fear and uncertainty.

The prices do go up due to greater demand, but reporters don't understand the futures markets, so they don't mention it and people can only assume hidden causes for inexplicable price increases and slow decreases. (Such as greed, which exists in all markets.)