how about that stock market

[Pat Anderson]

So, are you saying that those who control the beer control the world? Actually, there is evidence that in very hard times movie theatres and drinking establishments do well...

[Will-C]

Some thoughts that sound like good advice
The fire is out, but the movie might still stink.

That is our current assessment of the nation's economy as of Tuesday
evening. The rescue plan signed into law on Friday assures the nation
and the world that the federal government of the United States will do
whatever it takes to provide liquidity to the markets, enabling
business to continue (and in some cases, resume) normal operations.

Those operations had been in serious jeopardy because banks and other
institutions had found themselves unable to find buyers for the exotic
securities they had purchased from Wall Street. With the government's
assurance that it will act as "the buyer of last resort" spending $700
billion (and, let's face it, more if needed) to purchase these
securities, banks can resume normal lending practices, restoring
much-needed liquidity into the economy.

So the fire is out, and we can return our focus to the fundamentals:
Are businesses making money and creating jobs? What will happen to
inflation, interest rates, oil, gold, home prices and the dollar?
Although we've returned to the theater, we might discover that we
don't like the movie.

We'll have our answer in the coming weeks and months, but one thing is
certain: We will have our answer in the coming weeks and months (and
we're quite confident in what that answer will be - more on that
later). We stress this because some consumers unrealistically thought
Wall Street's woes ended Friday - as though President Bush had waved a
magic wand instead of merely signing rescue legislation. When
consumers read over the weekend that Asian and European markets were
faltering, their confidence plummeted - and so did the U.S. stock
market on Monday.

So, let's get realistic. It will take several weeks for the Treasury
Department to even begin disbursing the $700 billion into the economy,
and it will take more time for that cash infusion, massive though it
is, to improve the economy. But improve the economy it will. Thus, as
I said in my letter to you on September 19, we must not only be
realistic - we must also be patient.

The alternative is to react with extreme emotion, and we're beginning
to see signs of panic. According to the New York Stock Exchange, 80%
of the selling on Monday and Tuesday was done by individual
investors. After they caused the Dow Jones Industrial Average* to fall
800 points by 2:45 p.m. on Monday, institutional investors began
buying furiously, and the Dow rose 430 points in little more than an
hour, ending the day down 370 points. In other words, when the Dow was
over 14,000, consumers were buying and institutions were selling. When
the Dow reached the 9000s on Monday, consumers were selling and
institutional investors were buying. Somebody's acting foolishly here
- and it's not the institutions.

Indeed, we see some very encouraging signs. One comes from Warren
Buffett, who two weeks ago invested $5 billion into Goldman Sachs and
last week announced a $3 billion investment in General Electric.**
Long known as the world's most successful investor, Warren is showing
us how he does it: He makes no big bets, instead investing in a highly
diversified manner (his investment in Goldman represents only 2.3% of
Berkshire Hathaway's assets, and GE is 1.4%). And he holds his
investments for very long periods (when's the last time he sold
anything?).

Another sign comes from Bank of America. It has announced that it will
modify the terms of 400,000 distressed mortgages issued by
Countrywide, which BofA acquired in July. Until now, lenders have been
unwilling to help homeowners who are facing foreclosure. This move,
which we expect will be followed by others, will help reduce further
foreclosures and should help stabilize housing prices. (We hope some
of the homeowners who get rescued will be required to pay some kind of
penalty, but that remains to be seen.)

So, we believe the long-term prospects remain favorable. What should
you do? Here are our recommendations:

If you do not plan to spend the money in your accounts for three to
five years or more:
Take no action. Remember that your portfolio in the Edelman Managed
Asset Program(R) is highly diversified. That approach, along with our
rebalancing strategy, will continue to help control volatility for
you. We believe that these times represent a historic opportunity to
buy additional shares at what will be remembered in the future as one
of the great low points in history, similar to those offered in the
aftermath of the Crash of 1987. For more on this, read again our
letter of September 19, available at RicEdelman.com. We encourage you
to give serious consideration to investing additional money into your
portfolio.

If you plan to spend the money or start withdrawals in less than
three-to-five years:
If you have told us of your plans, then you need to take no action. We
have analyzed each client's EMAP portfolio to confirm that your
allocation is appropriate for you, and we will either make adjustments
if needed or contact you to discuss the matter. But if your situation
has changed since the last time you've talked with us, please send
your advisor an email or call us with an update.

If you are already withdrawing money on a monthly or annual basis:
Withdrawing money means selling shares - and shares sold won't exist
when the recovery occurs. Therefore, we recommend that, if needed and
where possible, you consider reducing the amount and frequency of
withdrawals from your EMAP portfolio at this time. It is better to
reduce expenses where possible and use other existing resources, such
as excess cash reserves, to supplement spending needs. If you need
assistance with this issue, please contact your Edelman advisor.

If you are glued to the TV, radio or Internet, watching events unfold
by the minute:
Stop it. The media is doing little more than feeding the fear, and it
serves you no useful purpose. Watch football instead.

[Sea Wolf]

Dave-

Nice professionaly written calming letter from an investment group to its holders to prevent panic and a lot of difficult phone calls, etc. Sounds like my broker!

Of course, there's some truth to it for sure, and I certainly hope it's right, as I, like a lot of others here, have a lot of $$$ in TSAs, IRAs, (and my basic state teacher's retirement system funding) etc., that is broadly invested mutual funds that is difficult to access without significant penalties, and I'm pretty much locked in, and have to endure whatever comes.

One major premise, however, is that we'll sooner or later return to business as usual with the USA undeniably on top and largely in control of the world's economy.

Personally, I think a lot of that is going to be history, even within what little remains of my lifetime, and the changes have already begun big time. Just think how much of what used to be our wealth is now in the Middle Eastern petroleum nations, and in industrialized Japan, Korea, China, Taiwan, Indonesia, etc.

Even our current wars in the Middle East are being largely financed by Chinese money from our negative balance of trade with them as they buy US Treasury Bonds sold to finance our military actions against the terrorists and Muslims who themselves are largely supported by our exported petroleum purchase dollars.

It's a new world out there, but very few want to hear about or discuss it, especially Presidential candidates who are afraid of the negative images associated with it as they, the candidates, promise a return to normalcy in America to everyone.

As a side note, I've always wondered just what stock brokers are doing with their own funds while they give us the standard "hold on tight" line during downturns.

Joe.

[Will-C]

Joe,
My boss sent that to me. After I read it I thought it would be a nice fit for the C-Brat site. It was a little windy but I also liked it. Thanks for all your posts and advice. I hope everything turns out ok for everyone except for some of the Wall street boys who were still looking for millions in bonuses after the company they were running bit the big one. I think everyone would like to see more people take more responsiblity for their actions. I mean a kid robbing a 7/Eleven for a couple hundred dollars will get more time than some of jokers who cheated people out of millions. I have a funny power point of the whole subprime mess send me an email address at fishdeem@verizon.net I'll forward it to you and you can take a look and edit it for this site it is funny but with some strong language. I received it from someone. Thanks for all you do for the brats and us lurkers and wantabes. You and Dr. Bob are the best!
D.D.

[patrick and linda]

good question, joe, what are the professional money managers doing with their money. well, this is only a guess, but if one believes the bottom has not yet occurred, wouldn't it make sense to pull out, into a cash position and then repurchase the same mutual fund and /or stock at a substantially lower price, later? secondly, good money managers are paid based upon a percentage of their investors portfolio under their direct supervision. so, if they recommend bailing out of the market now, what then happens to the managers revenue, you guessed it, goes down the shitter. so, they state, your long on the market, you have the same number of shares, without regard to the reduce value, hang in there, as everyone knows, those that stayed the course in prior bear markets finished better than those that pulled out. well, does make one wonder.
pat

[Will-C]

Capt Pat,
Who knows whats really going on but I agree with the basic premise that if you buy low sell high you make money. Selling now (low) and buying when things get better (high) is what the panic is creating. In my 401 k I changed my contributions to be in fixed safe (low paying) investments so my new contributions don't go up in smoke. Stay the course as they say. Take my advice, I won't be using! That's from the boys on Wall Street.
D.D.

[patrick and linda]

Hello DD,
i've discussed this matter with my personal financial advisors, capt. matt, capt. byrdman and capt. dr. bob. they tell me in strict confidence, although, byrdman, at the time might have had, one to many, that this bear market might be different than past bear markets because the baby boomer mass either has or is extremely near retirement. time is not on our side, and staying the course, when financial tsunamis are coming every other day, doesn't make sense. we need, as you have stated, to safeguard our monies, and if that means cashing out, or transferring into low risk bonds, then that's exactly what will occur. times have changed!
pat
ps: not one of my annuitants have lost a dime! granted 4% is not breaking the bank, but as i say to my customers, when you wake up tomorrow, you'll have more money in your account than when you go to bed tonight!

[morris_rl]

In the manner of Jonathan Swift (Gulliver's Travels, et al), I have "A Modest Proposal":

Include as a part of all corporate "golden parachute" exit packages that the senior executive who wishes to take advantage of one must don a parachute and parachute harness made of 24 karat gold (and nothing else) and jump from an aircraft from an altitude of not less than 10,000 feet above ground level (AGL). No reserve parachute may be used. All jumps must be made in military special forces High Altitude, Low Opening (HALO) style. Anyone who pulls the ripcord before descending below 1,500 feet AGL forfeits the entire corporate "golden parachute" exit package.

Televise the "golden parachute" jumps live on national television.



Hey, for the money we are spending, we deserve some entertainment!!

For the text of Swift's satirical 1729 "A Modest Proposal For Preventing The Children of Poor People in Ireland From Being Aburden to Their Parents or Country, and For Making Them Beneficial to The Public", see:

http://art-bin.com/art/omodest.html

Regards,

[Da Nag]

I'm big into looking for silver linings...they're almost always to be found, regardless of how bad a given situation appears. The current economic downturn is no different.

Perspective - it's a great thing. It's also incredibly easy to lose sight of, but once obtained, can provide much relief and clarity. With respect to the current financial mess, I've lost a ton of $$'s, and my early retirement plans are now up in the air. However, it's nowhere near the worst thing that's happened to me. It's not even in the bottom 20, and I'm guessing an honest assessment of most peoples' lives will reveal the same. Same goes for times of great prosperity. A huge upswing in the market or a booming economy, while certainly gratifying, means nothing to me in the grand scheme of things. Love, health, friendship...good or bad financial times, don't hold a candle to these priceless experiences.

Closely related to perspective, is focus...and it's so easy to lose in times like this. The background noise is everywhere...turn off the TV, stop reading the gloomy headlines, and think and act more like a surfer. "Enough of these negative waves, man..."

The best things in life, don't cost a damn thing. A great conversation with a friend, a walk in the woods with your spouse and hounds, a beautiful sunrise/sunset, the smells that linger after a heavy rain...the best life has to offer, have little to do with one's financial well being. Spending more time enjoying these simple and precious moments is not only fulfilling, but an excellent alternative to activities that cost money. Don't look at the loss of costly activities as necessary belt tightening...look at it as an opportunity to invest in mental health.

Perhaps the above is too simplistic and unrealistic for some...but it works for me.

[Ron on Meander]

[Doryman]

[NORO LIM]

Bill and Warren have got it right. Look back. Look around. In all the history of our species (count however you like) those of us alive in this country in this time are among the luckiest 1% of the luckiest 1% of humans who have ever walked this planet. Heck, many of us who regularly regale each other with whiny complaints about one thing or another have already far outlived the average life span of most of those fellow beings, past and present. It doesn't mean there aren't wrongs to right, beauties to preserve, and tragedies to grieve, but to paraphrase William F. Buckley, Jr., - who can dispute that this is the best time in history to be alive when you consider that masterful performances of the complete works of J.S. Bach are readily available to anyone who cares to listen?

[ccflyer]

Indeed, there are some opportunities. Anyone looking at paying a capital gains tax on the sale of an asset this year (an investment property, sale of a business or a stock) can reduce that tax to zero by selling some stock you've got a long term loss on that equals the taxable gain. Furthermore, if you have faith the stock you're selling is coming back, all you need to do is sell the stock and not buy it back for a month.
I was reviewing my personal situation with my CPA on Monday and he earned his fee developing a plan along these lines. So while I'm not happy with the hit I've taken over the past several months, I'd be really pissed off if I also had to write a check to the government next April 15th
BTW: this tax saving strategy works only on securities you own outside retirement accounts.

[Hunkydory]

[TyBoo]