The Great Depression

[kass_rants]

Okay. Listen up! I don't care what the media has been screaming about. This is NOT another Great Depression. I'm going to explain to you why.

Kass's Top Three Reasons Why This is Not Another Great DepressionThe Great Depression began with the crash of the stock market in October 1929 (the crashes are always in October...). Many investors

Comments

[alphafemale1]

I was hoping you would post. On Monday, the stock market closed below 10,000 points. I was panicking a bit, until I heard the last time that happened was...2004. :O Which made me realize that a least a part of this is normal market fluctuations, which made me feel better.

[kass_rants]

When I worked on Wall Street, we were debating whether the stock market would ever break 3000. Many people thought it wouldn't. It would get close and then drop, get close and then drop. And then we had that little "correction" in 1989 on my birthday of all the bloody things

[kateslover]

I used dollar cost averaging for years. My mutual funds have dropped precipitously of late (they're worth about half what they were last year), but I don't fear they'll go out of business. Unfortunately, now that I'm retired I don't have the capital to continue to invest while the price is down!

[kass_rants]

But at least you are smart and not selling what you have. It will come back. It always comes back.

[kateslover]

With my 20-20 hindsight I'm wishing I'd sold one of them off last year, but sell it now? Oh no - I merely LOOK dumb! *G*

Now if I could just sell my house in Virgina, THEN I'd enough left over each month go back to investing, albeit on a much smaller scale than previously. I had to refinance to pay my ex her half, so I'm stuck with a mortgage on an empty house.

OK, I'm done whingeing now...

[kass_rants]

Yeah. Hopefully the Fed's extension of loans to the credit markets will build bank confidence quickly and they'll get back to making mortgages again. Then your house will sell and all will be well.

[bantiarna]

There has already been news reports (American media though) this morning of mortgage apps and loans processing being up due to houses prices being so low. So we might start to see a turn around with this soon. Houses are still selling in my neighbhorhood. People I know are still closing on houses and getting loans.

[kass_rants]

Good! Good!

Banks are in the business of making loans. But they are easily frightened, spooky creatures and this thing has thrown them all for a loop. If they are given the confidence that their mortgagees will pay them and not default, they will gladly lend them money.

In England, the Central Bank is guarantying mortgages. So while it's not lending money, it is putting a safety net under the banks in case of default. And that's all the bank needs to give it the confidence to make loans.

I'm hoping this whole experience teaches them a lesson and mortgages go back to being only offered to the people who can afford them.

[faireraven]

*bingo

[kass_rants]

Aboslutely! A 26-year-old should take all of his money and throw it into stock-heavy mutual funds like there is no tomorrow. Nothing makes money over the long term like stocks. Nothing. And mutual funds are managed by fund managers who pick the most stable and long-term stocks in which to invest (and they switch when it makes the most sense).

[faireraven]

Yeah, my energy fund went gangbusters in the last three years. Almost tripled

[heidilea]

I did the same thing.

[kass_rants]

You have to ask yourself the question: how much money do I have in the stock market? The news reports on the stock market as if it's an economic indicator. It's not. Not at all. It moves on a whim and doesn't really reflect the health or lack thereof of the businesses whose stocks it trades.

And if you don't have money there that you need tomorrow, it really shouldn't matter to you at all. If Forbes could look at the 1987 crash and not blink and eye, none of us has anything to be worried about.

[heidilea]

Well, the news was on "stock market dipped below 10,000 today.." and I think, oh, that can't be good, continues, "...first time since 2004..." Me: Oh, well, then, whatever!

I have no money in the stock market. I have no money in anything, really, except perhaps my fabric/pattern stash, and I don't think that's going to crash.

That is, unless, the floor in the closet collapses from the weight of my collection.

[kass_rants]

Exactly. I don't have any money in the stock market either. Liquidated all that when I went full-time with the business. But even if I did, it would be for long-term growth and I know it would come back eventually.

You see, most people hear about the stock market falling and think it has something to do with them. If you don't own stocks, it doesn't.

The news often reports on it like it's an economic indicator, and it's not really at all.