Tuesday, October 07, 2008

Anxiety Society

We have nothing to fear but fear itself.
-Franklin Roosevelt

I read this article yesterday about a women who let her nine-year-old child ride the New York subway alone. People flipped out calling her, at the least, irresponsible. Seems people are not allowing their child go to the end of the driveway to pick-up the mail, making them phone home after walking a block to their friends house, and seriously considering following their child's school bus during a field trip just to make sure that said child was safe these days.

As Lenore Skenazy, the so-called bad mother, wrote:

For some reason we live in a society that sees little difference between letting a child frolic in the front yard and letting a child frolic in front of a firing squad. It's impossible for people to calculate the difference between real and remote risks.

She blames television and so do I. Just watch the coverage of the financial bailout and the drop in the stock market. Yes, it is serious and, yes, we are heading for a recession but television news shows are now throwing around the word "Depression." Jim Cramer, host of the very popular CNBC show, Mad Money, is seen in a soundbite on CNN telling people who need cash for the next five years to get out of the stock market. A statement that will do nothing but panic people but what CNN doesn't tell you is that Cramer has been saying this for the last two months. Its part of his overall investment strategy not a "dump everything and get out of the market" statement but you would never know this by watching CNN.

The most sensible thing I have read about this financial mess was in the Denver Post this morning. University of Denver, Daniels College of Business, professor Maclyn I. Clouse answered a few questions about the stock market:

1. If you are invested in stocks, what should you do?

If you’re in stocks right now, you should probably just sit tight. One of the best things to do is don’t look at the stocks everyday. Don’t get upset by the fact they’re going down. They may go down some more.”

2. What types of investors should sell-off their stocks?

If you’re getting close to retirement, often times they say if you’re within five years. I think within five years we still have a chance for stocks to come back, so I wouldn’t put it at five. But it’s going to take awhile, so if you’re all of a sudden in a position where you’re going to have to use actual dollars out of your 401k in the next year or two, then you might want to think about moving some of those stock dollars into bonds or fixed securities.”

3. What types of investors should stay in the stock markets?

The young people that still have time on their side. Time is the greatest asset you have in long-term investments because over time the market is going to come back.”

Not too sure about that "sit tight" advise but he is telling people to look at their own situation before panicking. The television news channels just seem to be fear mongering.

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