The Next Worst Day on Wall Street Wasn’t That Bad

by Kevin on October 24, 2008

I woke up this morning to dreadful news on CNN Money and Reuters. International markets had tanked and US futures had hit the “stop trading” point this morning before the market opened.

It all pointed to down, down, and more down. There was an article on CNN Money about how there was panic on the trading floor. Everyone is afraid. People are selling everything… This type of talk was mentioned this morning.

I honestly didn’t think much of it, but I thought of the rest of the nation waking up, reading their blogs and news services. What I mean by that is I’m sticking to my investment plan. Up, down, sideways, or upside down markets… I’m sticking with my plan.

But I wonder about my friends, co-workers, and everyone else out there. I wonder who put in panic sell orders this morning for their mutual funds and stocks. Who is putting their money in cash? Or stuffing it under a mattress?

That’s what worries me most. Yes, you could have saved yourself a lot of heartache if you got out of the market a year ago. But I’m willing to bet that we will pass that point again, and I can’t tell you when it will be. Stick to your plan. Invest regularly (we put money in monthly). And don’t check the balance everyday. (I can admit that is hard, especially with the beauty of the internet at my fingertips all day long.)

The reports this morning pointed to 6 to 10% losses today. More pain on Wall Street. As it turns out the major indicies went down about 3.5%… nothing I am cheering, but certainly better than what could have happened.

Sticking to the plan. One contribution at a time…


Kevin Wright October 24, 2008 at 3:23 pm

I was chatting with a friend over in Australia and he was asking me about how bad things are here. Sometimes, the media makes it sound worse than it is. I know there are some people out there who are struggling. I wonder how many of them are because of bad choices? Not trying to sound cold, but there needs to be some personal responsibility.

Steve in Denmark October 25, 2008 at 8:11 am

If you look at CNN, or the BBC World TV channels (here in Europe anyway), where they run the latest headlines under the main picture…it says (for example on Friday) ‘Nikkai closes down (several thousand points) at its lowest level since 2001’. And I think ‘hmm…don’t remember panic in the streets in 2001.’ How bad is it really, if it’s only as ‘bad’ as it was just 7 years ago?! The kind of headlines they like to run at the BBC and CNN would make you think it was time to kiss yer ass goodbye. I think a lot of people are talking a lot of other people into panicing.

Russell October 26, 2008 at 9:29 am

Although I sometimes tune into CNBC or CNN to hear about certain news events, as a rule I don’t use television as my news source. For once thing I’ve never figured out how they decided their choice of stories was important to me. So much of it is irrelvant or exaggerated or both.

Lately I’ve begun to wonder if I’m supposed to believe what they show me on the TV, or what I see with my own eyes. I’ve heard for months about the housing slowdown, but I ride my motorcycle around Florida and see new roads and new houses where there were once none. I see TV news with a thrust-into-your-eyes view of a Foreclosure sign but I haven’t yet seen one of those in person here in Florida. I hear the automakers are suffering and there are no loans and no money to spend, but I’m deluged with ads from the local auto dealers on TV and in the mail, they must have the money for advertising. I’m sure statistically these effects exist, but not to the exaggerated extent I’m led to believe.

I wonder how much of Main Street, as they call it, truly is affected or even interested in the financial situation. I went to a high school football game last weekend, and as I walked around it occurred to me, most of these people here probably don’t even have a clue what’s going on in the investment community. I went on a biker’s reunion ride yesterday and thought the same thing. Everybody was slurping down $2.50 bottles of beer and wanting to know if the Gators were winning. Not much sign of economic slump or financial panic there either.

As for those of us who do invest, this is not the time to sell your investments, but it’s the time to add to them. Now is when the dollar-cost-averaging method really shines.

Kevin October 28, 2008 at 12:29 pm

@Kevin: I’m a big fan of personal responsibility… it’s hard to tell how incorrect the media is. It’s just a big mess right now.

@Steve: Well I think the difference is since 2001 you’ve had that fund or index skyrocket… so as it plummets, people who got in near the top are now losing their shirts.

@Russell: Great comment. Yea, I think one of the statistics that gets thrown around a lot if “foreclosures have skyrocketed!” … well they have, to something like 1.5% of total home ownership.

That’s nothing. That means there are 98.5% of homeowners paying on time, not in foreclosure, etc. The problem is Wall Street created all of these fancy schmancy investment vehicles and leveraged way, way, way up so that that increase from say 0.5% to 1.5% in foreclosures is wiping them out.

Russell October 28, 2008 at 1:19 pm

There are two things I don’t understand.

One is if your home’s value is higher or lower than your mortgage, so what, I lived in a house in Tampa for 10 years and the value never changed the whole time. I think too many people fall for that line about owning is an investment, renting is throwing away money. No they are just two different ways to have a place to live.

(Now if you have to sell your house and move that is a different story if you owe money on the mortgage, you could be in trouble.)

Two is the adjustment of ARM, I’ve always had fixed mortgage, but I thought one advantage of ARM was you could come out ahead of fixed-rate if interest rates stayed low. Interest rates are as low as they’ve ever been. So why are ARM rates allegedly going higher and higher? (I don’t know that they are, I just read this in the newspaper that’s it’s one of the problems.) If this is not true, why in the world would anybody sign on for an Adjustable Rate Mortgage?

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