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#151170 - 10/07/08 04:14 PM Re: A good article on Financial Panic [Re: MartinFocazio]
Arney Offline

Registered: 09/15/05
Posts: 2485
Loc: California
I finally got around to reading this blog post. I don't understand, they quote Cramer verbatim, but still screw up the fact that Cramer didn't say to sell "everything". Various people on TV and blogs have heaped such abuse on Cramer for telling people to sell everything in stocks the other day. He never said that.

It's very easy to criticize, and especially to pick on a TV show host. Why would someone with a show about picking stocks tell people to get completely out of stocks 6-12 months out? That's just not practical. That's like blaming Jerry Springer for bad advice about keeping a happy marriage and harmonious home life. If I were paying Cramer to be my personal financial advisor, then I certainly wouldn't be surprised if he suggested I reduce my stock exposure, maybe 6-12 months ago, but I would not expect that when he has a TV show about picking stocks.

Also from that same blog post, "If Cramer really doesn't "want people to get hurt," he should stop telling them to try to pick stocks and time the market and start telling them to just gradually invest in a globally diversified portfolio of low-cost index funds."

Actually, he does recommend just that for most people.

#151197 - 10/07/08 08:17 PM Re: A good article on Financial Panic [Re: Arney]
benjammin Offline
Carpal Tunnel

Registered: 02/06/04
Posts: 4018
Loc: Anchorage AK
I agree, what I heard Cramer say was that if you need cash in the next 5 years, you are better to take it out now than to leave it sit. Sounds identical to the recommendation at the top of the quote to me.

I just looked at my 401k and my IRAs. All are invested the same, 65% into moderate risk stock funds, 35% invested into bond funds. Overall I have made money in the past quarter, and expect to continue in the 4th quarter, though not as much. Overall my stocks lost, but the bonds have done so well they offset the stocks and then some, yielding a net gain! I thought about re-proportioning my investment profile to increase my bonds and decrease my stocks, but I think it would be better just to leave it. As was stated previously, with the stock values dropping and my horizon at or near 20 years, I will be able to buy more stock shares now at a reduced price and watch them grow later when this mess is over with. If I shifted my investment and bought fewer stock shares now, my long term returns will be reduced. One thing we know from the past; no matter how big it falls, it always rebounds to a higher level later on.

I never liked hedge funds, and index funds have always made the most sense. Hedge funds are for professionals, and can get away from you fast if you aren't paying attention and don't have the ability to respond quickly, which is exactly what's been happening lately. Index funds don't react like that. For index funds to move that much in such a short time, the world market would really be on the verge of collapse; the sort of thing where you see big investors getting into rocket ships to find another planet to live on.

The ultimate result of shielding men from the effects of folly is to fill the world with fools.
-- Herbert Spencer, English Philosopher (1820-1903)

#151240 - 10/08/08 11:31 AM Re: A good article on Financial Panic [Re: LeeG]
MartinFocazio Offline


Registered: 01/21/03
Posts: 2148
Loc: Bucks County PA
My additions in red.

Originally Posted By: LeeG

1. Make a will and a living will.
2. Pay off your credit cards

3. Get term life insurance if you have a family to support

4. Fund your 401k to the maximum, but don't over-deduct - there are limits to total max contribution, so adjust the percentage so you don't short yourself on take-home.

5. Fund your IRA to the maximum and make sure it's a ROTH IRA, and make sure you're 401(k) does not disqualify you from participation.

6. Buy a house if you want to live in a house and can afford it, that means no more than 25% of your take home to house payments.

7. Put six months worth of expenses in a money-market account

8. Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund through any discount broker and never touch it until retirement

9. If any of this confuses you, or you have something special going on (retirement, college planning, tax issues), hire a fee-based financial planner, not one who charges a percentage of your portfolio

To point #9 - I disagree slightly, as the "percentage of portfolio" folks can be highly motivated to make you money, and the investment advisor I'm using for some of my interests has made some moves in the last 8 weeks that have kept his fees up, because he's managed to hold a defensive position that's been holding up way better than the market on the whole.

But all in all, solid, tough advice, especially #2, but in fact last month was the biggest "pay down" month in 20 years - people paid more debt off than they charged! That's incredibly rare.

#151242 - 10/08/08 11:56 AM Re: A good article on Financial Panic [Re: MartinFocazio]
Grouch Offline

Registered: 07/02/08
Posts: 395
Loc: Ohio
Originally Posted By: martinfocazio

But all in all, solid, tough advice, especially #2, but in fact last month was the biggest "pay down" month in 20 years - people paid more debt off than they charged! That's incredibly rare.

Because now that the stock market has tanked, many people will gain more by paying off debt than by investing money in low yield investment vehicles.

#151250 - 10/08/08 02:32 PM Re: A good article on Financial Panic [Re: MartinFocazio]
Arney Offline

Registered: 09/15/05
Posts: 2485
Loc: California
Originally Posted By: martinfocazio
...last month was the biggest "pay down" month in 20 years - people paid more debt off than they charged!

Are you privvy to more detailed industry info, Martin? I just ask because from news stories, it's not clear to me what August's consumer debt numbers actually represent. For one thing, from what I read, most of the decline is in auto loans, and I've been hearing that banks are getting quite picky about handing out new auto loans. So maybe the oustanding debt is lower because fewer new car loans are being made than usual? Or people paying down/paying off their car loans faster.

On the credit card side, people could be charging less (I'd laugh but wouldn't be surprised if the reduction in credit card debt is offset by an increase in debit transactions. "Charging $100 for that new hand bag on my CC is bad. But by using my debit card, I'm being responsible when I buy that oh-so-cute bag for next week's party!" People have such weird financial logic sometimes.). Or they could be paying down/paying off the CC balances faster. I've also read that some people are getting their credit limits lowered by the banks lately. Wow, when's the last time anyone ever heard that happening?

And I believe that student loans also fall under the "consumer debt" umbrella. I've also been hearing that student loans are harder to come by lately, too. The start of the new school year might contribute to an August dip. I'm wondering how many students weren't able to attend classes this fall because their student loans didn't come through? It's unfortunate that higher education in our country requires so much debt. Even community or junior college isn't that cheap unless you're working and going to classes at the same time.

#151255 - 10/08/08 03:13 PM Re: A good article on Financial Panic [Re: MartinFocazio]
Am_Fear_Liath_Mor Offline
Carpal Tunnel

Registered: 08/03/07
Posts: 3077
Well I think we are all in the last chance saloon and the last roll of the dice.

This graphic kinda sums up the sentiment at the moment.

I'm beginning to plan for a national central command economy with all that entails over here in the UK, which they had during WW11 and post WW11 up until the early 1950s (food, clothing and energy rationing). Its going to be a big change in lifestyles for many.

Dropping interest rates as a concerted global action (with the US dropping its interest rate by 25%) when the money supply is being radically inflated is an act of complete desperation.

Heck I might even go and buy some Tulip bulbs for the garden just for the irony.

Tulip mania

Edited by Am_Fear_Liath_Mor (10/08/08 03:23 PM)

#151258 - 10/08/08 03:53 PM Re: A good article on Financial Panic [Re: Arney]
MartinFocazio Offline


Registered: 01/21/03
Posts: 2148
Loc: Bucks County PA
Not privy to anything special, it's in all the financial news today:


According to the Fed, total consumer borrowing dropped at a 4.3 percent annual rate in August, the most since January 1998, during the Asian financial crisis.

Revolving debt such as credit cards decreased by $612 million during August and non-revolving debt, including auto loans, dropped by $7.3 billion.

Late Payments

The number of credit card bills paid late increased in the second quarter, according to the American Bankers Association, rising to 4.54 percent from 4.51 percent in the first quarter. The average bank card delinquency rate over the last two years is 4.44 percent. "

#151579 - 10/11/08 02:03 AM Re: A good article on Financial Panic [Re: MartinFocazio]
GarlyDog Offline
Old Hand

Registered: 04/05/07
Posts: 776
Loc: The People's Republic of IL
Addendum to #2

If you care about your heirs and have accumulated any assets in your lifetime, you may also want to consider a revocable living trust in addition to a will. There are several benefits that a will alone doesn't offer. Consult an estate planner before settling on just a will.


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