By: Revanche

Well, isn’t that dandy, Wall Street?

September 16, 2008

And what does dandy, mean, anyway? (so asked a friend of mine, today. I know what dandy means.) Current news has Merrill Lynch selling itself to BofA, Lehman Brothers bankrupted, and A.I.G. and WAMU on the mat.

What’s a girl on a quest to do? Contrary to all the other doom and gloom, or PANIC! articles out there, though, this article by Brett Arend has a few bits of rather sensible advice, my favorites in bold:

6. Stop pulling a Monty Python when it comes to your worst investments. If you ever saw John Cleese and Michael Palin perform their famous skit about the dead parrot, you know exactly what I mean. No, your Fannie Mae shares aren’t “resting.” They’re lying at the bottom of the cage with their feet in the air. What more do you need to know? So stop waiting for them to “recover” before sorting out your portfolio.

7. Don’t panic. Journalists, like markets, tend to move in herds. And by the nature of their jobs they write about the plane that crashes instead of the thousands that land safely. Remember, too, that pundits want to seem really wise by putting on serious expressions and saying things like “we don’t know how this thing is going to play out,” and “the situation could get a lot worse”. Bah. Guess what? We never know how things are going to play out. And the situation could get a lot better too. That’s the future for you.

8. When it comes to your short-term money needs, nothing has changed. Any money you might need within the next year or two should be held in cash or equivalents. That was true two years ago and it is true now. The stock market is no home for money you may need urgently. It could fall 30% or jump 30%. Nobody knows. You can get a one year CD paying 5% right now, and it’s federally guaranteed.

Seriously, a Monty Python reference? Perfect. It’s a toss-up, really, between that and that very salient point that Nobody Knows what will happen in the next six months, or heck, six minutes in some cases.

I’m not a fan of suggestion number 4, to set up a HELOC for emergency cash, though. Isn’t relying on credit in case of emergency just a step away from relying on credit? It doesn’t really seem worth the fix you might find yourself in by depending on a line of credit that the bank could very easily close off.

I already know that my deposits, minimal though they are, are covered by the FDIC over at WAMU. My other deposits are at Citibank, Emigrant Direct, ING Direct, well under FDIC limits, or in a family member’s debt ledger, so that’s pretty much a loss no matter which way you cut it.

My Vanguard retirement holdings, however, are not covered by the SIPC. Then again, my understanding of the Securities Investor Protection Corporation is that it does not exist to function like the FDIC. It’s a protection against fraud, or loss of actual stocks and bonds when brokerages go bankrupt, not against the loss of value represented by those stocks and bonds. The retirement account will continue to accrue more shares than value, and I’ll leave well enough alone.

Karen’s reminded me that while I still feel like I’ve got a foot on the ledge, I’m in FAR better shape than I was just a year ago, and I’m going to keep working at the savings and asset building no matter what happens in the economy. If I can pull the belt any tighter, I will, but I’d like to avoid corsetting while I still can.

What, if anything, are you doing?

5 Responses to “Well, isn’t that dandy, Wall Street?”

  1. I’ve put my fingers in my ears and scream “LALALA” every time people talk about it. If I let myself listen, I’ll try to scale my my 401K contributions or something. Ignoring the news is the only thing that works.

  2. i only read the news once a day instead of obsessively checking for updates on the market. i don’t need to drive myself crazy even more than i do already!

    i keep looking for ways to make extra money whether it’s through focus groups, surveys, craigslist or treasure hunting in my apt or rents’ house for stuff to sell on ebay. i’ve sold a few things already!

  3. Crying a little inside and trying to develop a steel stomach.

    Looking at my E-fund, which, at least, is not obviously depleting itself (though really, it is, due to inflation).

    Rolling my eyes at all the “how to save money” tips, because what if I already WAS doing those, even in “good” times?

  4. mOOm says:

    Yes SIPC is a protection against fraud, identity theft etc. With any normal brokerage account or mutual fund the collapse of the management company should have no effect on your holdings. They belong to you, they’re not part of the balance sheet of the company. This of course is not the case of a bank deposit where you are an investor in the bank, though the first in line if it goes under. With deposit insurance in the US (but not here in Australia) in every case the problem is likely to be getting your hands on your funds. You’ll get them eventually but things could get tied up.

  5. Revanche says:

    paranoidasteroid: 🙂 I totally understand. I usually don’t really get into it beyond a little superficial grumbling because I hate realizing how much is gone.

    sfordinarygirl: Good job selling stuff, it must be nice to clear out your home while making a little money.

    stackingpennies: Yeesh, I’m not even going to get started on inflation vs. interest rates.

    I think many of us already ARE practicing good money habits, for the most part.

    moom: thanks for the clarification. I forgot to mention, I think, that all my holdings are in Vanguard which is NOT protected by the SIPC after all.

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