Posts Tagged ‘panic’

We have a plan

Sort of. Details are still murky, but it looks like Paulson and the Fed now have the tools to unfudge the credit markets. We hope.

In the meantime, the stock market has declined rapidly. What does this mean for investors?

In my opinion, unless you think that the End of the World is nigh, you should sit tight. Although your stocks and mutual funds and ETFs may be lagging what you paid for them, the underlying companies should be just as healthy as they were the week before, by and large. The Hartford didn’t become worth 33% less in one day just because some idiot who runs the majority in the Senate flapped his gums out of turn. Or maybe it did — but you surely don’t have any more than say 1-2% of your portfolio in that stock, right?

If you DO think the world is coming to an end, it’s not going to do you a lot of good to sell and lock in your losses at THIS point, so don’t. If we’re doomed, it’s not going to matter whether you have less money than you did before; after all, we’re doomed, right?

The main problem now with the markets is that typical investors are panicking — in the face of hedge funds selling into any rally that comes along as they try to unwind their tortuous positions. Don’t help them. Breath deep, hang tight, and remember that this economy is so much more incredibly huge, interconnected, and creative by it’s nature than anything they could have imagined in 1929.

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