Wednesday, September 17, 2008

Market in turmoil

You have seen the news...

Today: Feds rescue AIG with $85 billion bailout

And from the past few days:

"Stocks suffered their worst losses in seven years as the failure of investment firm Lehman Brothers Holdings Inc. and the sudden sale of Merrill Lynch & Co. stoked investor fears of even deeper problems in the nation's financial system." Boston Globe

Greenspan calls this a 'once-in-a-century' crisis. So should you steer clear of stocks right now? The 'experts' seem to think so. This is from an exchange on Larry King Live:

King: Is this a good time to get into the market?

Orman: No. It's not a good time to get in with brand-new money. I would let these markets kind of wash themselves out....Are you kidding? These are the markets that you just sit on the sidelines and wait on the sidelines and stay away from them until everything works out.

Well, I disagree. I think the best time to get in the market is when everyone else is getting out. No one can time the market but I think if you have the right long term investment strategy this is as good a time as any to get in the stock market. Market emotions tend to cause people to make poor investment decisions as illustrated by the following two graphs.

What do you think? Also, does this make peer to peer lending more or less attractive?


Matt said...

Yes, look at how many analysts were saying to buy technology stocks right before they crashed. Then when the stocks were worth very little it was hard to find an analyst that would recommend them.

I think now is a good time to be in the market if you are there for the long term. Prices on the indexes right now are at about the same level they were 10 years ago, so when there is a rebound it is sure to take us above todays levels. That will happen once the housing market stabilizes and the credit crunch is over. No telling how long that will take but it will happen and when it does the market will move above todays levels.

Matt said...

I just went in and bumped up my 401K contribution rate from 12% to 15%. May as well take advantage of the discounted prices while they are here.

Matt @ Steadfast Finances said...

I think the Janus chart is near perfect when considering the everyday investor. Most people just don't get it when traders say...

"buy when fear is at it's worst, and sell when everyone you know is buying"

Nice find!

Ray The Money Man said...

Your post is at the top on "Stock Market" search. Great post. Much cooler heads on the replies at your blog. This has been a great market if you know how to play the QQQ's