What a terrible time the financial and stock markets have had!! I tend to be a somewhat optimistic Big Picture person. I feel like I must be to in order to invest in the stock market. I try to keep the perspective that in general the market goes up over time and it has periods of corrections when it goes down sometimes dramatically. When invested in the market everything seems normal and right when it is going up but somehow it does not feel right and normal when it goes down even though I know with absolute certainty it is going to go down at some point when I put money in the stock market.
It seems almost everyone would have noticed that credit card spending was way over done for years in the U.S. I don’t know about you but every week I was receiving several new “pre-approved” zero interest credit cards in the mail. I also noticed how eager the bank was to loan more money than what I believed to be the true market value of my home. Being involved with real estate I noticed that this was happening all over the country. I read numerous articles about the increase in Adjustable Rate Mortgages or mortgages that start out with a low interest rate and then increase over time so the home buyer can afford the initial purchase. Given all of this the meltdown was not a surpise yet I never imagined such a crisis would occur. My heart goes out to all of those who have lost significant amounts of their retirement funds and also those who have lost their homes and jobs.
When the market does go down or any stock for that matter I like to look at a long term chart to see if it looks reasonable that it will recover. A 10 year chart of the Dow Jones Industrial Average reveals that the Dow is back to 2003 levels. (I encourage you to check this yourself at BigCharts.com.) That is dire but tolerable. It actually seems much worse from listening to CNBC which I normally enjoy daily. The vital rule of having cash or cash equivalents equal to at least 6 months of living expenses helps which is a product of self discipline along with some good fortune. It also helps to remember that the rise off the bottom can be fast and hard. Let’s hope it gets here soon.