Hell Of A Week To Be A Boomer – Next?
You know what they called a 401K when the .com bubble burst? A 201K. That was a little gallows humor.
Every investment category took a hit. Good investments took a hit because people needed to sell the good stuff to cover their losses and margin calls on the bad stuff. The bad stuff just got hammered because nobody can determine just how bad it really is. Nice, huh?
The Fed stepped in with some symbolic help when they lower the rates and extended the terms on their loans to banks. It’s a seldom used financial function because of the stigma associated of going to the Fed in that way. Still, it was a reasonable move on their part. They bought some time for the markets to get things under control by themselves and kept their main options open if things get worse later. Will it work. So far, so good, but it will depend on how the financial markets feel about themselves.
So much for history, what’s next? The underlying problem is that the companies who make up the financial markets are still worried that there is another time-bomb out there. Principally, financial markets are worried that there might be another sub-prime like problem. If the smart guys made a mistake with sub-primes, what other imaginative financial vehicel is a mistake also.
Reasonably, they don’t want to get stuck with it. If things stay quiet for a time and nothing blows up (no additional bankruptcies for collateralized bonds), people will start to feel that there really aren’t any more bombs out there.
Keep an eye on things and follow Warren Buffet’s advice. “Be fearful when other are greedy. Be greedy when others are fearful.”