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Some of the people I work with like to dabble in trading stocks. They keep tabs on the stock market and they like to talk about their experiences. Through all the turmoil of the last few months their comments have indicated a challenging, but not incomprehensible market situation – until today. Suddenly this morning everyone was talking about the state of the markets and the failure (or rescue) of large financial institutions. The talk was not limited to those who follow the markets closely and the common refrain was "how much am I at risk and what should I do going forward?"
The turmoil of the last week has been so visible and surprising that people who have not been emotionally connected to the markets are feeling apprehensive about the market situation. It is an interesting and subtle shift to observe. (I don’t claim to be immune to this – I have felt concern for the markets since long before yesterday.) I stumbled across an article in the New York Times that seems to capture the feelings I heard expressed today.
. . . in this market, financial advisers agreed on Wednesday, consumers need to become their own chief investment officers, even when it comes to something as simple as finding a place to put their cash.
Taking primary responsibility for our own choices and situation rather than relying too heavily on the expertise or actions of someone else is always a prudent course of action.
Though I have been concerned about the economic position of our country, I remain optimistic that my family will be fine and also that our nation can weather this storm even if it is not always comfortable. I take comfort in the fact that the crisis is not (yet) universal throughout our financial system – it is primarily an issue with credit based financial institutions. The article tries to illustrate the difference between the types of assets at risk and those that are still safe by saying:
A money market deposit account . . . is an interest-bearing bank account that is insured . . . If you had been putting your money into a money market account because you wanted to avoid all risk, then you should consider the money market deposit accounts and other accounts insured by the F.D.I.C., like certificates of deposit and regular checking and savings accounts.
So long as enough liquid assets remain in the system (meaning those with assets do not freeze their money in panic) then the engine that is our economy may sputter and cough, but it should not seize up. Businesses may find it difficult to expand right now, but most of them should be able to maintain their status-quo while we weather this storm.
