Monday, July 30, 2007

The big Dip

Unless you live under a giant rock, you know that the stock market shed 800 points recently. Basically it is over credit worries. Hello! I have been worried about banking and lending practices for a while, so frankly this was all old news.

From my time at a financial services company, I have learned the following. It is not called "New" it is "News" it is what happened. As much as CNBC and CNN want you to believe that it is what is happening, I have news for you - it is past tense, it has happened. By the time they report it, the newness is over.

Furthermore, it should be noted, the only money that one should have in the market is money they do not need in the immediate future. It should be "mad money" or money that you will need years from now. Next month's car payment, house payment, tuition payment, rainy day savings, and so forth - need to be in a savings account. Yeah you get next to no interest or rate of return, but then there is no risk. This is not money you can afford to risk, it has been allocated already, you are just holding it - in a safe place.

So those ground rules established, I would encourage everyone to think about the 8oo point dip in the market of late as a REALLY BIG SALE. If there is a stock you liked 800 points ago and all factors remaining equal - then you should love that stock now to pieces.

Another way to look at it:

When your favorite department store marks down jeans by over 50% how many of you freak out? None, you go stock up. The stock market is just a mall for stocks - nothing more and nothing less. So if you got money burning a whole in your pocket, mad money, NOW IS THE TIME TO BUY. Not once we have climbed 800 points. Act now, this sale will not last forever - it never does - at least not until next time.


IHateToast said...

you scare me.

i've been shopping for jeans. hard to buy them here when they're so $$$. but me neeeds. i have none. really, it's need.

Susan said...

I am not scary! I am speaking the truth!

Seriously, people have it all backwards... long term investors should see the dips as sales and those not in for the long term should think about Vegas!