Welcome to the New Depression

[Sweet Papa Crimbo]

Looks like the economic markets are in a free fall.

 

The Fed just cut the prime rate 3/4 of a point (before the US Markets open).

 

I'm looking for severe government review and regulation of the mortgage loan industry and some mortgage brokers and mortgage appraisers to go to jail.

[caliber66]

Looks like the economic markets are in a free fall.

 

The Fed just cut the prime rate 3/4 of a point (before the US Markets open).

 

I'm looking for severe government review and regulation of the mortgage loan industry and some mortgage brokers and mortgage appraisers to go to jail.

One of them killed his wife and jumped off the Delaware Memorial Bridge on Friday.

[cryptique]

The stock market plunged over 400 points in the first two minutes of trading this morning.

 

Anyone scared yet?

 

The Dow has recovered slightly (now down only 262 points), but still.

[bobfrombob]

I'm looking for severe government review and regulation of the mortgage loan industry and some mortgage brokers and mortgage appraisers to go to jail.

I certainly agree with this but it was pretty common knowledge that banks and brokers were doing these loans that nobody ever thought there was a chance of being paid off. Action should have been taken before this house of cards collapsed.

[cryptique]

The Dow has recovered slightly (now down only 262 points), but still.

Whoops, it's now 345 points. I can't keep up.

[bobfrombob]

Anyone scared yet?

I would be a lot less concerned if the United States weren't 9 trillion in debt. A trillion here, a trillion there; soon you're talking real money.

[fortuneinmyhead]

everyone thank alan greenspan for the u.s. bubble and deregulated banking

 

 

things will get dicey but they will even out eventually

[Chendizzle]

everyone thank alan greenspan for the u.s. bubble and deregulated banking

 

 

things will get dicey but they will even out eventually

 

Truth. The economy will have upturns and downturns - it's inherent in capitalism. The business cycle just works this way.

[bjorn_skurj]

The economy is intensely personal. If you are doing OK, then the recession is just something in the news. I don't know how it'll work out for me. It might be fine, it might be the goathouse.

[Good Old Neon]

One could almost say, the economy is a fickle whore?

[quarter23cd]

The economy is intensely personal. If you are doing OK, then the recession is just something in the news.

Right. "The economy" is a term that covers a lot of ground and means different things to different people. For instance, many people would say the economy has been "good" much of this decade. Perhaps this is true--in fact, I know people who have done very well in the stock market in recent years. "Takes money to make money", I guess, and those people I know who already had money, by and large, have more of it now.

 

Those of us working stiffs who don't have much of a portfolio to speak of--our experience of "the economy" translates to whether we're getting laid off our jobs or not. For me, working in the IT sector, the early part of the decade bit hard...and job growth and recovery was slow. To put it another way, I've spent much of my career thus far just happy to be getting a paycheck, even if the job sucks. Could be worse, I guess, but not really what I'd call "good." And it looks like things might get worse again, which blows.

[ZenLunatic]

The economy is intensely personal. If you are doing OK, then the recession is just something in the news. I don't know how it'll work out for me. It might be fine, it might be the goathouse.

 

This applies to everything, not just the recession.

[Mrs. Peel]

I don't know crap about the stock market, but I do know that I've lost 10% of my 401K investment in the first 3 weeks of January when I was up almost 20% for most of last year. I just moved everything out of my diversified fund into bonds and money market in hopes of keeping what's left of it and not losing any more for a while.

[ZenLunatic]

I don't know crap about the stock market, but I do know that I've lost 10% of my 401K investment in the first 3 weeks of January when I was up almost 20% for most of last year. I just moved everything out of my diversified fund into bonds and money market in hopes of keeping what's left of it and not losing any more for a while.

 

Your 401K plan is probably mostly invested in the US stock market. It goes down, so does your 401k. Depending on your age, your 401k is a long-term investment, you shouldnt worry about the loss now. Now is the time to buy-in more not sell off which you did. Unless you are close to retirement, all your losses will be recovered by the low buy-ins of the current down-turn. Just trust the markets will recover, which they will. Basically you are betting and investing in America, where you live and breathe, it will not fail. The economy is our backbone, without it, we dont exist anyways. Nothing better to invest in.

[bjorn_skurj]

This applies to everything, not just the recession.

Which is why all the sooie-kimcatch kind of gets on my nerves.

[Mrs. Peel]

I know you're right about it being long term, but when I don't know what is going to happen with the housing market or my huge increase in property taxes or my job or blah blah blah.....I'd like to know I've got something there to protect me in case I need it. I would never withdraw from my 401K unless it was absolutely necessary but who knows if it will be absolutely necessary sometime soon. I will switch back to the stock funds when I see a light at the end of the economic tunnel, but for right now I'm happy to be keeping the money I have even if it's only accruing 2% than to be losing a year's worth of contributions in a month.

[Motorik]

If they ever bring back debtors prison then I'll get excited. Until then its just numbers.

[cryptique]

From my admittedly limited understanding of this stuff ... you sold your stock funds after the prices dropped, and now you're talking about buying them back when they rise again. That's where you're going to lose the most money -- not from the temporary downturn in the market.

 

You should stay in your stock funds during downturns, because if you're contributing to your 401(k) at a constant rate, you're buying more shares for your regular contribution than you were when the price was higher. That's the silver lining of the downturn -- you're buying more shares. When the prices rise again, you have more shares than you would have had, giving you a higher long-term yield.

 

If you were retiring soon, it would make more sense to protect your accumulated gains by shifting toward less risky funds (lower risk / lower return) ... but if you're still decades from retiring, it's better to wait out the bad times.*

 

_{* This is how I understand it, anyway. I'm no expert on this stuff.}

[ZenLunatic]

I know you're right about it being long term, but when I don't know what is going to happen with the housing market or my huge increase in property taxes or my job or blah blah blah.....I'd like to know I've got something there to protect me in case I need it. I would never withdraw from my 401K unless it was absolutely necessary but who knows if it will be absolutely necessary sometime soon. I will switch back to the stock funds when I see a light at the end of the economic tunnel, but for right now I'm happy to be keeping the money I have even if it's only accruing 2% than to be losing a year's worth of contributions in a month.

 

I do believe the market will go down more and I see my funds going down, but I still have like 30 more years before I will withdraw my 401k. I see my funds low and makes me feel bad but I see how low I am buying in at and it makes up for it. I will see probably see a couple more recessions before its all over. I do understand if you wanna withdraw from the market, but you can lose money in playing too. You just sold when you are down, and possibly could be buying in when its up. You lose all that gain. I feel it a safer move at my position just to ride it out and not play with it, but good luck to you. Hopefully you can buy back in at the bottom.

[ZenLunatic]

From my admittedly limited understanding of this stuff ... you sold your stock funds after the prices dropped, and now you're talking about buying them back when they rise again. That's where you're going to lose the most money -- not from the temporary downturn in the market.

 

You should stay in your stock funds during downturns, because if you're contributing to your 401(k) at a constant rate, you're buying more shares for your regular contribution than you were when the price was higher. That's the silver lining of the downturn -- you're buying more shares. When the prices rise again, you have more shares than you would have had, giving you a higher long-term yield.

 

If you were retiring soon, it would make more sense to protect your accumulated gains by shifting toward less risky funds (lower risk / lower return) ... but if you're still decades from retiring, it's better to wait out the bad times.*

 

_{* This is how I understand it, anyway. I'm no expert on this stuff.}

 

Thats pretty much it. I said similar too. Its really easier advice to give then follow though. When playing with your real money, emotions get involved and you make hasty decisions. Sometimes it takes experience to learn.

[EL the Famous]

yep, you have to think long term in these situations. not trying to pile on though, pee...hope that works out for you.

[Mrs. Peel]

I can't buy in if I don't have any money to buy with. That's how I look at it. I don't think of my 401K as a way to play the market, I think of it as my future happiness. Although I completely understand what you're saying, the prudent side of me just wants to have something there to gamble with if I want to. Right now I'm just watching the money come out of my paycheck and dissipate into thin air. What I lost since January 1 took me close to a year to put in. Maybe if I wait it out I'll see that money come back but maybe I won't. I'm not willing to just throw my money away. Right now my 401K is essentially a savings account which is A-OK with me.

[Mrs. Peel]

yep, you have to think long term in these situations. not trying to pile on though, pee...hope that works out for you.

 

 

I guess I just don't understand the logic. I start with X amount of money to invest in the market, which then loses 10% in 3 weeks, which means I now have only 90% of X to invest, and the money I contribute each pay period is less than what is being lost, so every week I have less money than I had the week before. How does this help me when the markets start to make a profit? If I move the money now into areas that are gaining 2% out of areas that are losing 15-20%, when I move it back into the stock market later I'll have more money to give back.

 

I realize that the market has ups and downs, but a recession is a whole different ball game. If my parents had been more prudent during the crash in the 80s I wouldn't have had to rely on scholarships and financial aid to get me into college. But they "stuck it out" and lost a good deal of my college fund before the markets turned around.

 

I'll be moving back into higher risk stocks when we have seemed to hit bottom and started the slow climb back up, but for now I'll be happy to know what I've given up as spendable income to put into the 401K is not just evaporating. I'd rather stop contributing altogether and use the money now while it's in my hand.

[jenbobblehead]

I guess I just don't understand the logic. I start with X amount of money to invest in the market, which then loses 10% in 3 weeks, which means I now have only 90% of X to invest, and the money I contribute each pay period is less than what is being lost, so every week I have less money than I had the week before. How does this help me when the markets start to make a profit? If I move the money now into areas that are gaining 2% out of areas that are losing 15-20%, when I move it back into the stock market later I'll have more money to give back.

my mother is a stock analyst and financial consultant in CT. I can give you her number/contact info if you want to talk to a professional to placate your fears.

[Mrs. Peel]

Thanks, Jen. I'm fine. I wish I had never brought it up though!!!