Quote:
Originally Posted by jub jub
I've been putting money in my 401 since 94 and I had a nice little nest egg. After today, my nest egg has all bit disappeared. I've been contemplating taking all the money out, suffer the loss and put what's left into a CD.
All I can think of is, if the big 3 tank, that will be the end of my 401.
Has anyone had any similar ideas or better yet, what kind of strategy are you using to circumvent what I feel is inevitable?  |
Jub, didn't have much time to explain earlier so let me try to go a little further here.
A person with any investments at all would be a fool not to be concerned right now. These are trying and confusing times with the economy right in the forefront.
My company, which I started over 35 years ago, is an employee benefits brokerage firm and although 401k's are not my 'specialty' per se, I have a number of clients whose 401k plans are under my care (so to speak).
Because of that I have had a securities license for all these many years and while that makes me no expert by any stretch of the imagination, it has caused me to take numerous courses on securities as well as an active role in studying and discussing the cause and effect of the market trends on a daily basis with my clients and those whom I consult for.
Scary times indeed, but if you consulted a graph of the DJIA since the early 1930's you would see somewhat consistent patterns of ups and downs over the years. Almost without exception, every downturn (usually lasting no more than 2 to 4 years) is followed by a stark upturn as money comes flowing back into the market based upon peoples perceptions of the economy.
The reason I mention peoples perceptions is that it is not so much the reality of the current economic conditions, but rather peoples perceptions of the economy that spur the growth or the downward spiral of the market.
If you're not sure that is true, take a look at the stock prices of some of the companies that are actually doing quite well right now (profits at or higher than expected, strong P/E ratios, etc) and you will see that even their stock prices have fallen. No logical reason of course, just a general fear by investors of the markets in general. It all evens out I guess because when the upturn comes, even companies who are not thriving will find their stock prices rising along with the rest.
In other words, investors 'perceptions' of the market create a self-fulfilling prophesy. Folks think its good then it becomes good, people think it's bad it becomes bad.
Almost always, a markets downturn timing is damn near predictable, though not precise. In other words, we were due.
In almost every market downturn, or recession if you prefer, there is a catalyst event. Whether it be the bankruptcy of a Savings & Loan organization (like the 3 year bear market following the S&L crisis) or someone finally takes a peek at the actual P/E ratios of some of the tech companies and screams murder (causing the 2 1/2 year bear market following the tech stock crisis).
In the current economy, there was already a general uneasiness in the marketplace due to rising oil prices and an abrupt turnaround in new housing starts. Then came the AIG news and the Shearson Lehman news and we were off to the races. The timing could not have been worse with a Presidential election right around the corner and the front runner suggesting increases in capital gains tax, payroll taxes, estate taxes and individual tax bracket increases. This has made everybody nervous and has cause many to start putting their cash in a coffee can buried in the back yard rather than invest in an uncertain market.
Important to remember though is the fact that this money has not disappeared or been run through a shredder. It's still there, it's just not in the market right now. Also important to remember is the old adage that for everyone who sells a share of stock at what he/she thinks is a bad price, the buyer of that share is buying it at what they think is a good price. That share of stock hasn't been retired, it's still out here only it is now in the hands of the new buyer. That's how some people get rich (or richer).
However, 'this too shall pass'.... and as I mentioned earlier, past experience tells us that when the market does recover, it will do so with a vengeance. How soon....too early to tell but if I were a guessing man I would say inside 18 months. How bad....again very uncertain but I have believed from the beginning of this downturn that we could see the DJIA drop to a low of 7500 pts. Remember though, I just follow and study the market somewhat and am not Nostradamus so I could certainly be off in my expectations.
The point of this whole novel is fairly simple. If you sell when it's bad and then get back in when it's good you lose on the front side and never fully regain on the backside... a double whammy of sorts.
Apologize for the length and lack of brevity with this post Jub, but I thought you ought to know where I was coming from in my earlier posts.
Mike
