Markets are back on their feet and talks of Armageddon and the end of the world are replaced by hope--albeit tentative—that the financial storm has passed. CNN earlier today reported that Americans are feeling a wee bit better about the meltdown and there were little green arrows all over equity electronic boards this morning.
Can we dare hope that the worst is now over?
It feels good to see markets recovering. Even Nouriel Roubini, professor of economics at NYU who as early as 2006 has been beating heavily on the doors of government to take action, looked slightly relieved in his interview with Bloomberg television last week. He said finally the US government has done the right thing in recapitalizing US banks and not just buying toxic assets.
Michael G. Manuel, chief investment officer of Sun Life Financial, and J. Edmond Garcia, director for investments, said in a recent interview that in terms of size of collapse, AIG seemed to be it, so while there may be several more failures in the coming months, these are likely not to be as earthshaking as the insurance giant. (Read a recent article I wrote on "Should I just keep cash under my pillow?" with Manuel and Garcia as resource persons here.)
“We are kinda there at the bottom, with AIG the turning point already. You may have a couple of Wachovias and Washington Mutuals, but nothing the size of AIG,” says J. Edmond Garcia in that interview.
Apart from that, if economists are to be believed, the recent rally is not based on false highs but on analysis that the US government is moving on the right direction with regard to how it is going to strengthen Wall Street. Critics of the bailout worry about how it is going to affect US taxpayers, but Manuel explained that the injection of funds would do much to unfreeze credit by bringing back confidence in the banking system.
But much as it feels good to take a breather, the work is not done. Manuel says cleaning up the banking industry will take around two years, and he said that way before these big guys in the US predicted a two-year turnaround in the US financial markets. The sooner the cleanup is done, the better for everyone, he says.
“The faster you address the problem, the faster the recovery will be, and that will be reflected in stock prices,” Manuel says.
If banks are not aggressively cleaning up balance sheets and letting bad assets sit on balance sheets, throughout the time they sit there, banks will be preoccupied with how to unload these instead of going gung-ho on lending, which is its main business, he adds.
As the recession in the US and the global economy unfolds, other less obvious impact will also show up. The International Labor Organization was on Bloomberg and BBC this morning predicting that countries like the Philippines and other Asian economies with high levels of migrant workers may be affected by the slowdown in destination countries.
That’s certainly a sobering thought, and hopefully you guys out there who are working in other countries will be spared.
In the meantime, keep things in perspective and tune out the shrill voices that sow fear instead of calm. This is not the first time the world saw equities markets going out of whack, and certainly the next few months or years is not the world's first time to recover from a crisis.
Has the financial storm passed?
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Would like to agree on the parting thoughts of the writer. It's nice to hear soothing words and positive perspectives, but tell this to those retirees or about to retire whose pension funds are substantially down or completely wipe out.
How could investors whose hard earned money invested to GSIS Fund
and Philam fund would be able to regain confidence in the market place now that their retirement money is almost gone?
hi leo, i understand where you are coming from. for many, especially those who have already retired, or are about to, the loss is painful. many are being forced to work a little bit more to make the retirement fund last longer. it's a pain that nobody, least of all myself, can simply wave away with words that the market will eventually recover.
many who are not yet in this stage will learn from these lessons. diversification, for example, will protect many of us from losing all of our money in times of market turbulence. in addition to diversification, we need to be more careful with our asset allocation. as we near our retirement age, it would also be best to shift to more liquid assets from stock and stock funds to make sure we are protected from volatility. i am sure mr. ebreo that with your knowledge of financial planning and investments, you are somehow spared from the pain, but the lessons are there for all of us to use in our own lives.
plus, at the end of the day, keeping things in perspective (being grateful for small blessings of health, family togetherness, simple pleasures like being able to watch the sunrise) do not have to be expensive. eating camote sometimes can be as filling as eating steak, when we partake of it with our loved ones. :-)
Good day, Salve. " simple pleasures like being able to watch the sunrise", gazing at the stars and the moonlight, that I often do.
Someone said " the beauty of the picture and size of the canvas depends upon the imagination of the painter." Therefore, I encourage your reader to think like a good painter.
But for more information on how big guns on Wall Street, the Godfather of all stock market players, manipulated the market to their advantage go to: counterfeit-o-meter.com, see the expose of some the best mind here in America.
Has the financial storm passed? I don't think so, I think that it has only began and it is going to get worse. Argentina may default on its debt. Soon to follow...US of A. Please prepare for the worst. This financial storm will not go away easily. This may take a long time to settle and a lot of damage is foreseeable.
The financial storm has not yet passed. Most experts agree that we have yet to reach the bottom in 2009.
In times like this there is no better thing to do but to strive to save money. I've written articles on money saving tips. Check these out:
http://www.zdiaz.com/index.php/2008/03/04/money-saving-tips/
http://www.zdiaz.com/index.php/2008/04/16/more-money-saving-tips/
It’s not over yet. We’ve not seen the bottom. Don’t worry it will get better in the long run. My stocks are down 60%. I’m still buying. It’s time to buy. As Warren Buffett said, be scared when everybody’s greedy and be greedy when everybody’s scared. :-)
i suggest you buy if you have fresh funds coming in.. be safe if your funds are limited and no replishment..
perhaps the past can share a bit of perspective on this question.
The Roaring Twenties was a time of prosperity and excess despite warnings against speculation. Many believed that the market could sustain high price levels. Then in 1929 came a series of crashes interspersed with a series of gains in the stock market. However, the market embarked on a steady slide in April 1931 that did not end until 1932, concluding a shattering 89% decline from the peak.
Bank failures snowballed as desperate bankers called in loans which the borrowers did not have time or money to repay. With future profits looking poor, capital investment and construction slowed or completely ceased. In the face of bad loans and worsening future prospects, the surviving banks became even more conservative in their lending. Banks built up their capital reserves and made fewer loans, which intensified deflationary pressures. A vicious cycle developed and the downward spiral accelerated. The Dow did not return to pre-1929 levels until late 1954.
So has the financial storm passed this time? Not by along shot.
The way I see it there's only two things that can happen. Things either get worse or things get better. Either way, having money on hand or being liquid is not enough. You have to protect your money what ever currency it is in from diminishing in value. That's why people with extra money should invest and in this crisis stocks aren't very good stable investments. You should try to invest more in real estate. That way if the economic crisis begins to turn around you're sure that your investment also appreciates.
Anyways, to learn more I think you should check out this website. http://www.urban-institute.blogspot.com
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The financial storm hasn't passed yet
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