A Crisis Of Financial Faith

CBS Evening News: Behind The World's Largest Fiscal Collapse In Decades Is A Tangled Web Of Fear And Uncertainty

(CBS)  After the Dow dropped 18 percent last week and the Standard & Poor's 500 experienced the biggest one week drop since 1933 - fear is now the driving motivation and, as CBS News correspondent Priya David reports, investors find themselves in a crisis of financial faith.

"It's panic, it's fear - I think we just don't know what's going to happen," one investor said.

And the media drumbeat doesn't help. Many investors responded when Jim Cramer, host of CNBC's "Mad Money" said this on his television show last week:

"Whatever money you need for the next five years, please take it out of the stock market right now,"

When people hear that, David reports, they call their brokers and many sell.

The markets even track fear itself. The Volatility Index, or VIX, is at a record high.

"VIX has been soaring, will continue as credit crunch continues," says Jordan Goodman, author of "Fast Profits in Hard Times."

The mint has stopped taking orders for gold coins as panicked investors stampede out of the banks and stocks into the safety of tangible assets, David reports.

History tells us that investors go through an emotional cycle. It starts with hope as growth begins, moving to greed, then to skepticism of high prices. Before the cycle is complete, investors then shift to fear as the stock drops, then panic and finally despondency and a bottom, and back to hope again. But as to whether we've reached that bottom, experts disagree.

"We're on our way there, but I don't think we're there yet," Goodman says.

"Now you have these perma-bears come out, the ones who are saying repent now the end is near, and they're talking about seeing another 20, 30, 40 percent decline," says Sam Stovall, chief investment strategist for Standard & Poor's.

But Stovall points out that two thirds of stocks on the New York Stock Exchange are trading at a 52 week low. He calls that a sure sign of an emotional bottom.

"Now, when everyone is telling you how bad they feel, chances are we're at a bottom and its time to buy," Stovall says.

But no one knows exactly where the real bottom will be and it could be weeks before we even know we've hit it.

"People who are trying to buy stocks, even strong stocks right now, are trying to catch a falling knife," Goodman says.

One thing that's for sure is that we're going through a period of uncertainty, David reports, as investors try to decide if it's too late to sell or too early to buy.

The experts that spoke to CBS News agreed that investors should make decisions based on facts, not feelings. So, they say, take a deep breath before you take your next step.

[lloydbest1]

Posted by Demongirl60 at 04:36 AM : Oct 13, 2008
Posted by bread57 at 09:34 AM : Oct 13, 2008

Instead of $500000 allotment to all U.S. adults how about something like this.....?

Those whose 401K fund balances fell below $500000 would be reimbursed to either their maximum values over the past 12 months or to $500000, whichever is less. Two examples:
Person A had a 401K balance peak at $320000 last October. It is now worth $230000. My idea would be he''d be reimbursed $90000 to bring it back to the original value.
Person B had her 401K balance peak at $675000. It really tanked and is now worth only $350000. She would be reimbursed only to $500000. That''s not the full value of her peak asset base but is still a whole lot better than having to settle for $350K.
If the financial industry can demand and get a full or even partial bailout with no visible regulatory plan to insure the kind of nonsense that brought us to this sorry state ever happens again, then ordinary workers should be entitled to some kind of package or safety net themselves.
Demongirl60, your idea really is too expensive and Bread57 such expense as would be incurred by my approach will, at least be tied up in investments rather than simply handed over to spend thus avoiding an inflationary spiral.

[credibility2]

Those who panic and are fearful are individuals that are superficial and rely on materialism, rather than morality, personal ethics and integrity to guide their lives. They are morally corrupt and spiritually bankrupt. And make no mistake, the greed and frenzied avarice not only occurred on Wall Street, but it also occurred on Main Street and especially with the Congress and Democrats.

[checkthepast]

Financial faith? Has the stock market now become synonymous with religion?

Posted by skeezix06

The word ''faith'' is not synonymous with religion.
I have faith that if you think about it you will agree.

[bread57]

Demongirl60:

Giving $500,000 to every adult in the US (there are about 200 million of them) would cost $100 trillion. If you think we''re in debt now...

Plus, putting all that money into circulation would create hyperinflation on a scale unknown to human history. I''m not a fan of the current bailout, and agree that something needs to be done to help ordinary homeowners facing bankruptcy, but your plan ain''t it...

[bread57]

x

[gop_will_win]

We need money Jesus to perform a miracle for us.

[albertw40]

I might vote for John McCain if my retirement funds go back up in the next three weeks. One fund, for example, would only have to go back up $30,000. The Bush-Cheney, McCain-Gramm "deregulate everything" philosophy helped cause this mess. Bush-Cheney, McCain-Gramm should be held accountable for it.

[hdinsight]

The "tangled web" is not of fear & uncertainty. The "tangled web" is of greed & deception.

Now that these gluttons have been caught up to their armpits in the cookie jar, the only "fear & uncertainty" the financial sector feels is generated from asking themselves, "How can I steal cookies in the future if everyone will be watching me more closely?"

[neo269]

These are just speculators cutting each others'' throats - and getting what they deserve.

[skeezix06]

Financial faith? Has the stock market now become synonymous with religion?