the interest is up and the stock market's down...

[oldtimer]

I keep waiting for it to tank and when it does I have no guts to jump in.

JJK

Most, and mean almost everyone doesn't.  That's why you stay diversified with cash, real estate, etc.  One of the first questions a finance professor asked us in business school was something along the lines of "you know interest rates are going to fall sending bond prices higher.  Where do you want to be invested?"  People shoot their hands up and say "bonds."  No, he says, you always want to be diversified.

[Max2]

We have had it easy for a while.  A 100K mortgage @ 15% would be $350K in interest alone amortized over 30 years.

 

 

 

 

 

 

_{Monthly, Not Seasonally Adjusted, MORTG, Updated: 2015-08-06 2:21 PM CDT}

_{1yr | 5yr | 10yr | Max From to}

_{Created with Highstock 2.1.730-Year Conventional Mortgage Rate©19801990200020102.55.07.510.012.515.017.520.0197519801985199019952000200520102015Shaded areas indicate US recessions - 2015 research.stlouisfed.org}

_{April 1991: 9.49}

_{Source: Board of Governors of the Federal Reserve System (US)}

_(Percent)

 

 

 

Edit:   Well I guess my chart didn't post

Edited August 24, 2015 by Max2

[Coytee]

I keep waiting for it to tank and when it does I have no guts to jump in.

JJK

 

Not knowing how you're invested, you might consider taking a fraction of your funds (10%, 25% more/less???) and drop that portion in "today" (whenever you feel comfortable) and then drip the balance in over the next several weeks or months in similar type amounts.

 

There is no need to pull the full trigger on any specific day unless someone from Above has informed you that the moment you are making that decision is in fact the bottom.

 

I sometimes liken it to gas prices.

 

If gas prices are rising, you want to fill your tank as often as you can (buy as the price goes up so you're getting as much of the "current" price as you can)

 

Whereas, if gas prices are falling, you are better off driving your full tank to empty before filling, to allow maximum price drop.  Since you must have gas in car to move, you might also prefer to put $5.00 in at a time rather than fill it, until the price solidifies and keep from filling up so you don't carry around the expensive gas as you're burning it.

[oldtimer]

Or get a Tesla.

[JL Sargent]

So financially most people in the US are down about 10% over the last few days of trading?..............................................

[wvu80]

Or get a Tesla.

 In West Virginia, we don't have hydro or nuclear, so we refer to Tesla's as "coal burning" cars. 

[oldtimer]

 

Or get a Tesla.

 In West Virginia, we don't have hydro or nuclear, so we refer to Tesla's as "coal burning" cars. 

 

The gist was "think outside of the box." 

[Ski Bum]

So financially most people in the US are down about 10% over the last few days of trading?..............................................

 

Only those with skin in the game, so less than half in the US are affected, and this is really only of consequence to those who sold or are selling in a panic.

 

Cheaper gas, cheaper groceries, cheaper energy, so there is a bright side that will affect everyone.  The markets are not the economy.

Edited August 24, 2015 by Ski Bum

[oldtimer]

Yeah well, skiing is a waste of time and money! (I'm teasing ya big lug.  Noogies!)

Edited August 25, 2015 by oldtimer

[jacksonbart]

Here is the solution : 

 

This economy sucks.COM

[Jim Naseum]

So financially most people in the US are down about 10% over the last few days of trading?..............................................

 

Only those with skin in the game, so less than half in the US are affected, and this is really only of consequence to those who sold or are selling in a panic.

 

Cheaper gas, cheaper groceries, cheaper energy, so there is a bright side that will affect everyone.  The markets are not the economy.

Good comment. The only people surely affected are those retiring between now and 2020. Those people have lost real, actual dollars from their retirement accounts. Maybe as much as 15% right off the top. And the downslope hasn't ended yet. The economy is OK, but not great right now.

[Ski Bum]

http://www.theonion.com/article/shoddy-chinese-made-stock-market-collapses-51163

 

lol!

[Zen Traveler]

 

 

So financially most people in the US are down about 10% over the last few days of trading?..............................................

 

Only those with skin in the game, so less than half in the US are affected, and this is really only of consequence to those who sold or are selling in a panic.

 

Cheaper gas, cheaper groceries, cheaper energy, so there is a bright side that will affect everyone.  The markets are not the economy.

Good comment. The only people surely affected are those retiring between now and 2020. Those people have lost real, actual dollars from their retirement accounts. Maybe as much as 15% right off the top. And the downslope hasn't ended yet. The economy is OK, but not great right now.

 

 

All of the above are good comments, imo. The stock market is speculative and the reaction is mainly because China's whole economy is tanking and not only their stock market. Again, at the beginning of 2009 the DOW was at 8,000 and no one knew where it would go...With it being at 16,000 now I only hear pessimist (or buyers) saying it will drop below 10,000 and even then those retiring in 2020 have a chance to diversify or gamble with stock allocated money and have a positive ROI.

 

Of course, as others mentioned, the people making the real money are the ones who've been steadily investing as the market went up and are selling now. Btw, if they are investors they won't be paying the same percentage of their income as most tax payers.

Edited August 25, 2015 by Zen Traveler

[Jim Naseum]

If this was 1985, and your savings was in a 10% CD, you'd be laughing at the stock market nose dive. But the FED, in they infinite wisdom, decided that all capital must be put to work in the stock market. They lowered interest rates to zero, making insured savings pointless. Like it or not, you are shoved into big risk.

[JJkizak]

Because there was no liquidity in the market (no cash, no lending, no spending) the feds lowered the interest rates to keep us out of a depression.

JJK

[Zen Traveler]

And who knows what would've happened at the end of 2008 if the Government didn't bail out the banks and AIG.

 

Let's face it, most investors had limited knowledge to what Credit Default Swaps were (and even fewer the ramifications of them not being a safe hedge) prior to that and now I wonder why everyone isn't clamoring to give the SEC more funding and oversight.

Edited August 25, 2015 by Zen Traveler

[oldtimer]

I wonder why everyone isn't clamoring to give the SEC more funding and oversight.

 

Really?  Follow the money.

[Ski Bum]

If this was 1985, and your savings was in a 10% CD, you'd be laughing at the stock market nose dive. But the FED, in they infinite wisdom, decided that all capital must be put to work in the stock market. They lowered interest rates to zero, making insured savings pointless. Like it or not, you are shoved into big risk.

 

To play, or not to play?  What is one supposed to do given the risks of "safety" result directly in eroding net worth and ultimately less spending power?  Since that spending power is what will really matter to you and those who depend on you, the greater risk may come from sitting out the game.  And if you have the time and can buy and hold forever, compounding is just a wonderful thing.  

[akdave]

 

If this was 1985, and your savings was in a 10% CD, you'd be laughing at the stock market nose dive. But the FED, in they infinite wisdom, decided that all capital must be put to work in the stock market. They lowered interest rates to zero, making insured savings pointless. Like it or not, you are shoved into big risk.

 

To play, or not to play?  What is one supposed to do given the risks of "safety" result directly in eroding net worth and ultimately less spending power?  Since that spending power is what will really matter to you and those who depend on you, the greater risk may come from sitting out the game.  And if you have the time and can buy and hold forever, compounding is just a wonderful thing.  

 

Well said.

[Max2]

^{If this was 1985, and your savings was in a 10% CD, you'd be laughing at the stock market nose dive. But the FED, in they infinite wisdom, decided that all capital must be put to work in the stock market. They lowered interest rates to zero, making insured savings pointless. Like it or not, you are shoved into big risk.}

 

Not necessarily. If an insured CD was paying 10%  you would likely have a car loan @ 15%+  and a mortgage rate of 15+ percent as well.  Unless you were already wealthy, the majority of your extra cash for savings is going to interest on other items.  30 years ago, If we all made the same money then as we do now, our homes would be half the size as our budget would be totally different due to the insane level of interest. Of course the homes would be cheaper, but we would still be worse off.  Everything is relative. If a bank will take the risk and loan someone with a 575 credit score 150K for a home at 4.5% on a 30 year, how in the heck can the same bank pay anything worth talking about on a CD with Fed funds where they are?   Money is very, very, very cheap right now, but when interest rates start going up the people with savings will be able breathe easier while calculating paying cash for an item vs taking out a loan and paying the interest rate. The banks will be more negotiable on their deposit interest as well.  A problem with higher rates is the economy will slow, as manufacturing, spending and pretty much everything else will too.  This means less loans for big corporations who provide bonds to give these bigger rates of return depending on their credit. Higher interest rates only help people who are sitting on cash and don't need to borrow.