I won’t pretend to know a lot about the semantics of the American economy (as was evidenced by my C in my grad level economics course), but anyone who’s paying attention can see that the banking industry isn’t doing so well lately. One of the largest banks in the world, CitiGroup, has been laying off thousands of employees a year for multiple years now after claiming billions of dollars worth of loss in the last quarter of 2007. This is just one example. Anyone remember the scene in Mary Poppins when the kids caused a run on the bank and everyone demanded their money back because they didn’t feel like their money was safe? I’m just about ready to go demand all my tuppence.
Last week the bank Washington Mutual went under and was bought out by JPMorgan Chase. This hits a little close to home as I used to bank with WaMu for years. I’m sure everyone who had money with them is still fine, but you can’t help but feel a little unsettled when the people handling your money have to openly admit that they can’t handle their own.
On top of that, it was announced yesterday that CitiGroup would be acquiring all the Wachovia branches and other areas having to do with their banking. Wachovia as an entity will still exist due to the fact that they have dealings outside the banking industry, but it’s still intimidating to think that everyone who banks with them just got rolled over into another bank by no choice of their own.
Another example is that the Lehman Brothers bank was bought out by Barclays Capital. This was really the beginning of the end if you look at it from a timeline point of view. This destabilization started a ripple effect that we’re all feeling. This started talks of a downward spiral that the government was contemplating stepping in to prevent, but that didn’t go quite according to plan.
Yesterday afternoon the House of Representatives rejected a $700 billion bailout plan and as a result the DOW plummetted a massive 777.88 points, the largest decrease in one day in the history of the stock market. And as selfish as I’ll readily admit it was, my first thought was not for anyone but myself. “What’s gonna happen to my 401k?” I thought. I’ve been contributing for over a year and a half and have a nice chunk of money in it. Nothing huge, but a sum I’m proud to say I set aside for my future without spending on something frivolous in the present. However, due to stock market trends I’ve steadily lost money as I contributed, and have seen a decline of over $400 recently. That’s not even taking into account the waves that have been created in the past 2 weeks. I’m afraid to check my 401k today to see where it’s at.
I’m trying to remain optimistic though. It can’t last forever, right? I don’t believe for a second that the American economy will completely crumble and that I’ll be foraging for food in the wilderness within the year. I’ve heard arguments both for and against the idea that we’re entering another era of Great Depression. I can’t say whether or not I think this is true because I honestly just don’t know enough about happened the first time around. But after all that’s gone on recently, it may be time for a little history review.
Entries (RSS)
There is a sale on Wall Street the prices are down and I have always felt that is the time to buy. I say this with enthusiasm because the market has always returned. Since 1925, before the biggest crash ever, the market has had many deep dips and has returned. Seven years ago, just before 911 the market had reached the 14,000 mark, just about four years ago it was in the 7,000 range.
Yes my 401K is down but when the market returns, as it always has, I will be in good shape because I continued to buy while the prices were low.
Should we be worried? I think there is reason to be cautious but if you look close you will see that it is the Federal Government that OKed and required the loaning institutions to make loans to people that could not afford/qualify the homes they bought. Do you remember the political BS that came out ” We need to help all Americans become a home owner everyone should have the American Dream of owning a home”. I remember hear that and then all these crazy loans came about so that people that could not afford the payments got loans that would ballon or differ the interest to a later date. The reasoning the loaning institutions gave us for getting into these very ricky loans was that the home will increase in value, you will be making more money (we all automatically get raises and promotions each and every year right no one ever get fired laid off or becomes ill), you will be getting a tax break for paying the interest, your home is an investment. Does anyone remember or ever got into one of these loans. Please remember the loan officers get paid for these loans and they want a payday too.
That is not the only problem though. We need to be responsible and live within our means, save money, sacrifice, determine what is really needed and what is just something we want.
AMEN Brother! I had to wonder what line of bull these people were fed who set up ARMs. Rates almost always go up. Sad thing is, I switched from Compass to WaMu because I thought they would be more stable (and the fact that Compass ripped me off). Sometimes you can never tell. At least I like Chase.