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Panic?

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This morning I read an interesting article that I want to share:

http://money.cnn.com/2008/10/10/pf/minds_over_money.moneymag/index.htm?postversion=2008101005

These guys might actually be smart.

When I got up the S&P500 was about 200 points down. an hour later it is only 19.9 down. Instead of following the Asian trend of being about 10% down end of their Friday, the European markets are only down about 7%. So, maybe the worst is over. The news report this morning said that the massive hit in the Dow yesterday was caused by individuals pulling their money out of their Mutual Funds. My experience is that individuals have a tenancy of either buying high and selling low, or Selling low and buying high.

Lastly, housing prices. A home last week that was worth 200K, sold for 200K. Why? because the buyer could afford the payments. That house sold for over 400K a year ago, then was on the market for about 9 months. Why didn't it sell at 400K again, because the speculation had gone out of the market. That buyer at 400K could not afford the payment for long, just thought they would make some fast money. Homes are now selling, but for realistic prices.

WOW.

I hope I don't regret posting this stuff, sometimes it is hard to be realistic when all around you are being pessimists. On the other hand in the 15 minutes that it took to write this, the S&P is only down 17 points.

Charles

Oh by the way, please reply to this post. It will be interesting to see what our community thinks now. World coming to an end or we have a weekend coming up and lets enjoy life and our family. Sadly enough it is still warm enough here that Anna informed me that I want to mow the yard Monday

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Homes are now selling, but for realistic prices.

That's a good point! And I really hope it's not as bad as my imagination can imagine it being. But I'm still nervous....:lol:

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Charles, thanks for putting things in perspective. The last week's market events have given me to time to reflect on a few things. Sometimes times like this bring out irrational behavior (it has in me too). I hope you agree:

1) The world isn't ending. This is panic driven momentum. Ignore the noise and stick with long term financial plans. Markets, whether it be stocks, houses, or the price of tea in China, revert to fundamentals eventually.

2) Money isn't everything. Time to turn off the non-stop market updates on the computer and enjoy life. Hang out with family and friends.

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Yup,

This weekend planting some landscaping at my new home (thanks Charles :wink:) and going to a football game.

The way I look at it is, I have 30 years or more til retirement, I can ride this out. I'll also have a home paid off before then, it doesn't matter if the value falls, I'll have a roof over my head. We also opted for a house $100,000 under what we qualified for...because I don't ever want to be in a position I was in years ago, not in a house over my household head, but over my individual head from when ex-DA ran off with huzzy.

I don't have to worry about a job, let's just say my market is very, very stable right now...same with hubby.

If need be, I could grow my own food, I can live without TV or computers, and as I found out recently, even without electric!! I guess all those years of watching Little House on the Prairie pays off! lol

Don't get me wrong, I hate seeing my 401K drop, but I see the big picture, so I'm not going to panic.

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If need be, I could grow my own food, I can live without TV or computers, and as I found out recently, even without electric!! I guess all those years of watching Little House on the Prairie pays off! lol

Well I'm screwed then. I couldn't stand Little House on the Prairie. :lol: I would not know the first thing about growing my own food, can't live without my computer, and during Ike when my power was out-I thought I was going to die! :oops:

Maybe I just need to "man up." :lol:

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Charles, thanks for putting things in perspective. ....

2) Money isn't everything. Time to turn off the non-stop market updates on the computer and enjoy life. Hang out with family and friends.

Great point. I've been offline quite a bit due to my brother's (untimely) death three weeks ago. My parents are at a resort for a month trying to heal. I called them yesterday morning and they were in a total panic because the cable wasn't working at their condo and they don't have Internet there, and didn't know what the markets were doing.

If there is a higher power or something out there that forces us to slow down and shut off when we need to, I am certain this was it. I gave them the info they wanted and told them to go to the beach or the golf course...or church...or whatever would make them feel good. It's a message we should all hear. Take it from me, I'm struggling to put things into perspective after a sudden and meaningful loss. Money comes and goes.

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Aw Leslie,

So sorry for your family's loss...:-(

That's one reason I don't panic (economy wise at least), because you never know when you won't be here tomorrow, so I just live for mostly for today.

I wish you well...

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You know, I may be in the minority here, but I Wish that I had a few thousand sitting around because I would actually be BUYING stocks right now!

How do you think millionaires are made? Buying low and selling high.

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LOL I had a conversation with a friend of mine this morning who is obviously in a VERY advantaged position overall...she left her home in Arizona and paid cash to build a new one in the Southeast. Her place in AZ isn't sold yet and I asked her if she was going to try to lease it or what. She said she thinks that's best because she doesn't know what she would do with the cash from the sale anyway!!!!! The way she looks at it, she's making more money by letting the place sit there and riding it out (or leasing it) than she would be by selling it and sticking the $300K in a CD or sinking it in the market. (She's 60+, BTW) so in a slightly different position than a lot of us.

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I think this will continue at least until NOV 5 , and depending on who's elected I would be prepared to Jump all over the market.

It will take a long time for the housing mess to clear up as there is more to come.

Personaly what has happened is a good thing "so far"...sometimes it is good to get things teetering on the edge as it wakes us up, and makes us pay attention so the pressure moves up the chain.

We have lived far to long beyond our means as a whole, now maybe we will again put the CC away and start to save a lil , do without things we realy dont need.

I see some dismal proffit margins for the holiday season though.

On a lighter side......Proud American! To help you better understand the financial crisis in which our country finds itself, I have attempted to put it in terms common people, like you and me, can easily understand. If you had purchased $1,000 of shares in Delta Airlines one year ago, you will have $49.00 today. If you had purchased $1,000 of shares in AIG one year ago, you will have $33.00 today. If you had purchased $1,000 of shares in Lehman Brothers one year ago, you will have $0.00 today. But, if you had purchased $1,000 worth of beer one year ago, drank all the beer, then turned in the aluminum cans for recycling refund, you will have received $214.00. Based on the above, the best current investment plan is to drink heavily & recycle. It is called the 401-Keg. A recent study found that the average American walks about 900 miles a year. Another study found that Americans drink, on average, 22 gallons of alcohol a year. That means that, on average, Americans get about 41 miles to the gallon! Makes you proud to be an American!

I do have a question....Oil = 80 bucks a barrel......why is gas still 3.40 a gallon? hurrician is no excuse.

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On a lighter side......Proud American! To help you better understand the financial crisis in which our country finds itself, I have attempted to put it in terms common people, like you and me, can easily understand. If you had purchased $1,000 of shares in Delta Airlines one year ago, you will have $49.00 today. If you had purchased $1,000 of shares in AIG one year ago, you will have $33.00 today. If you had purchased $1,000 of shares in Lehman Brothers one year ago, you will have $0.00 today. But, if you had purchased $1,000 worth of beer one year ago, drank all the beer, then turned in the aluminum cans for recycling refund, you will have received $214.00. Based on the above, the best current investment plan is to drink heavily & recycle. It is called the 401-Keg. A recent study found that the average American walks about 900 miles a year. Another study found that Americans drink, on average, 22 gallons of alcohol a year. That means that, on average, Americans get about 41 miles to the gallon! Makes you proud to be an American!

OMG Too funny:ROFLMAO2::ROFLMAO2:

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I do have a question....Oil = 80 bucks a barrel......why is gas still 3.40 a gallon? hurrician is no excuse.

Prices are starting to come down....

But now NJ has allowed trickery that was seen in other parts of the country. It's 5-10 cents more a gallon if you use CC/Debit card with Visa than if you use cash.

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First off...Leslie, I'm sorry for your loss.

Deanna, I was/am more stressed here by my house damages then the electric, because it had turned actually sort of cool out when we got back from the manditory evacuation. I even ate the MRE's without complaint. (a couple of them had these fabulous gigantic cookies) I don't much care for camping, but since we were inside, it wasn't too bad.

Well said everyone. Money isn't everything. I've had it, and not had it. Life goes on. No reason to panic.....yet.

Charles:

Correct me if I am wrong. People bought more than they could afford to buy, with little or no money down...got an 80/20 loan, and/or didn't have to prove their income, or else perhaps got an ARM........didn't read the fine print, (or it wasn't explained to them) and now they're sinking. Now after all of this market mess, home prices and gas prices are falling down to a more reasonable amount.........but these people are now hurting because they not only got the bad loans, but they paid over inflated prices to begin with. Does that about sum it up?

z

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Thanks everyone. I didn't mean to put a damper on the otherwise cheerful thread...LOL. But thank you for your kind words. :)

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Correct me if I am wrong. People bought more than they could afford to buy, with little or no money down...got an 80/20 loan, and/or didn't have to prove their income, or else perhaps got an ARM........didn't read the fine print, (or it wasn't explained to them) and now they're sinking. Now after all of this market mess, home prices and gas prices are falling down to a more reasonable amount.........but these people are now hurting because they not only got the bad loans, but they paid over inflated prices to begin with. Does that about sum it up?

z

There had to be someone who was willing to buy the paper (loan), and they did, now we see where it got them. It was not the consumers fault all the time.

I really do not think there was a problmem with 80/20 loans either. The purpose of these loans were to escape PMI insurance, which is why they became so popular. Remember, the holder on the first lien is only in for 80% of the value, and HSBC bought the majority of the second liens from many of the companies.

Interest rate, interest rate, interest rate..........Everyone wanted the lowest interest rate. Even when fixed rates were in the low fives, and even a few on the high fours, consumers (with excelllent credit) wanted the 3/1 ARM at 3.25%, or a six month LIBOR vs. a fixed rate. It totally blew me away at the ignorance.

Lastly, in 2004 or 2005, nealy HALF the mortgages originated were non owner occupied purchases.

Remember the bubble is very isolated to a few states. Here in the midwest, things are pretty stable, but a home must be in a better condition to warrant a fast sale.

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Hi all. Talking about the panic, DH was thinking about pulling his 401K because it's dropping and his job sent him a letter that the company wasn't going to contribute the .02/mi anymore (for each mile he runs, company contributed .02).

So, he was thinking about pulling it. However, I told him if he does, he will have to pay tax on it because he's not vested yet. Was this the right thing to tell him or should I have told him 'what ever you want to do.'

Oh, Leslie. I'm sorry for your loss. My Dad died 2 yrs ago and it was a sudden death as well. Only took a month. I'm sorry.......

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amortgageman: I thought I put some blame for the banks (those who bought the paper) too. Sorry.

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Hi all. Talking about the panic, DH was thinking about pulling his 401K because it's dropping and his job sent him a letter that the company wasn't going to contribute the .02/mi anymore (for each mile he runs, company contributed .02).

So, he was thinking about pulling it. However, I told him if he does, he will have to pay tax on it because he's not vested yet. Was this the right thing to tell him or should I have told him 'what ever you want to do.'

Tell him to leave it where it is. It only becomes "real losses" when he pulls it out.

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I've been away from this thread for awhile, but with respect to pulling a 401k, it would be a disaster.

First, vesting has nothing to do with taxes. Vesting means that you don't have access to the money contrbuted by an employer until a certain period after they make the contribution. Some companies require 5 years. So, if they contributed $20k over 5 years and then you leave the day before, that money is not there anymore. It was never yours really. Some companies do not have vesting periods at all.

Second, if you pull the 401k money out, it gets taxed at ordinary rates at the top of your marginal rate. Suppose you hvae taxable income of $80k and you "pull out" $20k. You pay tax on ordinary income of $100k for that year. That's punitive because you lumped income into one taxable year and placed it at the top of your marginal bracket. Figure 25-28% for many taxpayers plus state rates (average 5%) for a total of 30-33% right to Uncle Sam.

Third, you pay a PENALTY 10% on top to Uncle Sam for making a withdrawal.

Example: Withdrawal scenario:

Vested 401k funds were "worth" $100k one year ago at its high.

Today, it has a cashout value of $60k.

10% penalty: $6k

33% federal & state tax: $20k

You're only left with net cash of $34k and have lost the invaluable tax gift of being able to accrue earnings on that money tax-deferred. :(

Or you leave it and step up contributions. :D

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Thank you for your advice. Now I know what 'vested' actually means, and it's not a good idea to pull your 401k.

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Sorry for your loss Leslie..I don't have any brothers or sisters, but I lost two friends while I was in the Army that were just like my brothers. I know that a loss like that is very painful.

Second wouldn't now be the time to start buying some stocks since they all pretty much dropped? I can start buying stocks in my company this Feb. Before the stocks dumped they were at 69.00 share, I can buy them for 30$ a share (at that time) I don't know what it is at now( I haven't looked) but will the market still be sucky around Feb? The company I work for's stock is Ryder Systems Inc. Any info would be appreciated.:)

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What will the market be doing in Feb? No one seems to know what the market will be doing Monday at noon, so predicting Feb will be even more difficult.

If you are investing, you should think long term. If you will look at the stock market, over time it always goes up. Of course there are periods of time that include the 1930's and 1987 & etc, but long term you will be better off investing. Let's say you buy Ryder at 30 this month, at 25 next month etc. As long as the company is fundamentally strong in a few years or shorter time than that, the stock will be back at 69.

A major part of the decline in US stocks has been Mutual Funds being forced into selling stock, because their stock holders have liquidated their holdings. One of the evidences of this is that typically if money is pulled out of the market by the big investors, they put their money into the bond market. This time the small investors pulled their money out of the market and have it under their mattress. They are waiting until the market goes up to buy back again. Sort of Selling Low and Buying High way of investing.

You mention Feb as a time you are interested in. If this is because you are going to need money then, I would suggest that you put your money into a savings account. These accounts are safe and will earn you a little money. If you don't need the money in the next few years, invest in your company. Well, when you buy stock it does become your company to a degree.

Charles

Putting money into the system helps yourself and everyone else, as this makes $ available for the banking system to lend money. Maybe even to Ryder, so they can continue their expansion.

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