Bank failures

Now might be a good time for CPF`ers to move money to federally insured accounts...just as a precaution. The possibility of things going bad for the stock market and especially banks....seem high right now. If your bank is open tomorrow (Saturday)...move most your money to a savings account. If not and you can, do it first thing Monday morning.

I don`t like doom and gloomer crap...and probably all the fears will blow over. But no harm in playing it safe till it does. Monday could be the start of a very bad week

Badbeams3 said:

Monday could be the start of a very bad week

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As if the last two months was anything to write home about (DJIA fell by about 15%). Thankfully, except for IRAs most of my money is in my bank account. The IRAs have plenty of time to recover from a stock market crash as I can't start taking out of them for at least 14 years, and don't want to until I'm retired anyway.

I look at it this way-when all the dust settles there's going to be some great buying opportunities. I may yet have a chance to get rich.

*shrug*

I see right now as a buying opportunity.

I use Sharebuilder and have low commission prices (I'm on the $20 per month plan -- which gives me up to 20 buys at no additional charge), so I'm accumulating shares as the price continues to drop.

Even if the market goes lower, I will still be cost averaging and will be okay long term.

I'm also racking up nice dividend reinvestments during these low price times (my dividends are buying more shares).

With this said, I do keep some money in savings accounts -- but the interest rate is so low right now that one loses money vs. inflation.

Yeah I'm dumping my IRAs/401Ks into certain stocks that I'm sure will still be around in 20+ years when I'll need them. Other items are either non liquid (I just inherrited the rest of my parents house a couple of weeks ago, as soo as I prep it for sale, it'll be on the market - should be a few weeks - I intend, believe it or not, to take a large amount of that, and put it back into real estate, in the form of a vaction house, up where my parents always vacationed.

My "liquid" assets are/have been FDIC insured for a long time

Selling your stocks and moving to savings is a really really bad idea, unless you need to retire now and cash out.

The markets will come back, and those who buy high and sell low now will get burned.

Never sell low and buy high. Do the opposite of what the rest of the herd is doing. Play it smart. Don't panic and fall off the cliff with the rest of the herd as they trample themselves down the cliff.

LED-holic said:

Selling your stocks and moving to savings is a really really bad idea, unless you need to retire now and cash out.

The markets will come back, and those who buy high and sell low now will get burned.

Never sell low and buy high. Do the opposite of what the rest of the herd is doing. Play it smart. Don't panic and fall off the cliff with the rest of the herd as they trample themselves down the cliff.

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Generally I agree with this. My concern is that the market could take a real beating this coming week. Bank failures really move the market...and should panick set in...much more so. Paulson has warned this week that no bank is to big to fail...I assume he is suspecting trouble or knows there is a upcoming problem. I`m not suggesting selling and staying out...but moving to the sidelines temporarly as a protective move...for a week or so.

Doesn`t look like theres much to move the market up...and a lot that could move it down...IndyMac is already in trouble and concerns about Fannie Mae and Freddie Mac remain high. Iran and Isral continue to spit at each other driving oil up ( I wonder if Iran buys oil shares before missile launches knowing it can profit off each display...perhaps enough to buy/build ten missles for each one fired) and adding more stress to the market.

No doubt there will be bargains in the market at some point. And good news from a company might calm the market somewhat (Apples new Iphone sales for example)

It also pays to be diversified.

One of my stocks is up 50% since I bought it-- and it helps that this company gets military and police contracts even during down economic times.

On another note, I tend to like to have a moderate portion of dividend growers in my portfolio for exactly these kinds of times. A company that raises dividends 20+ consecutive years (one company in my portfolio has raised dividends something like 52 consecutive years) is a confidence booster -- even if the stock price is lower, it is good to know that one is getting some reward for holding.

Federally insured accounts have lots of limits usually $100,000 to a maximum of $250,000 for some retirement accounts (maximum per bank, joint accounts, and such)...

And remember, that this is our government (already massively in debt) which is not only insuring the account... It is also the same government that apparently caused/accelerated this bank run.

And regarding uninsured deposits:

The failure will cost the federal deposit insurance program about $4 billion to $8 billion, the FDIC said. Some $1 billion of uninsured deposits are held by about 10,000 customers, the FDIC said. Those depositors will get an "advance dividend'' equal to half the uninsured amount, according to the statement.

The FDIC insures $100,000 per depositor per insured bank, according to the agency's Web site. Customers may qualify for more coverage depending on the type of accounts they own, and some retirement accounts have a $250,000 limit.

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-Bill

It would be nice if they adjusted the old $100,000 coverage limit to cover the effects of inflation. $100,000 is some people's (one tradesman I know) yearly salary these days, and not anyone's life savings.

I've not kept up with the recent trends of the stock market, but I heard on the radio the other day that 100% of the ten year periods and 97%of the five year periods in the stock market's history have made money. I'm figuring on letting my investments sit right where they are for a while to come.

Federally insured dollars really aren't worth much when they're inflated.

Ya'll ought to be thinking about investing in wheelbarrows. At one point in the twentieth century in Germany it took a wheelbarrow of DM to buy a loaf of bread...

I know, it can't happen here, right?

I have just under $100k in CD's and money market accounts at IndyMac. I called the special FDIC number set up for IndyMac customers and they told me I'll have no problem getting my money since it's under $100k (crosses fingers). But they did warn me that Monday morning the IndyMac branches will be swarmed with panicked people wanting their money. Can't blame them...

NA8 said:

It would be nice if they adjusted the old $100,000 coverage limit to cover the effects of inflation. $100,000 is some people's (one tradesman I know) yearly salary these days, and not anyone's life savings.

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Nope, not listening....

Sub_Umbra said:

Federally insured dollars really aren't worth much when they're inflated.

Ya'll ought to be thinking about investing in wheelbarrows. At one point in the twentieth century in Germany it took a wheelbarrow of DM to buy a loaf of bread...

I know, it can't happen here, right?

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WHAT? NO! STAY IN THE STOCKM MARKET, IN THE LONG TERM, IT ALWAYS GOES UP.

just ask Zimbabwe, their stock market is the BEST performer on planet Earth the past 2 years. Really, go check them out.

When will we ever learn? :shrug::sigh::green::mecry::laughing:

Sub_Umbra said:

Federally insured dollars really aren't worth much when they're inflated.

Ya'll ought to be thinking about investing in wheelbarrows. At one point in the twentieth century in Germany it took a wheelbarrow of DM to buy a loaf of bread...

I know, it can't happen here, right?

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LOL...True, but wasn`t that at the end of WW2?

I`ll admit we have a problem with inflation on the edge of the radar...if gas remains high the cost of transportation will mean everything we buy will have to go up in price. But I would hope before then some quick solutions to oil will have been found...reducing the speed limits is one possible example.

If not...well I`ll just cut back on spending. I really don`t need underwear.

BB thanks for the link.
At first I cannot understand why BadBeams3 was in such a panic all of a sudden. The mortgage crisis has been going on for a year now. And the stock market has dropped more than 15% fairly regularly. But bank failures is something else.

+1
I am retired.
1/2 of my income is from a 20 year Canadian government bond ladder in my RRSP (401K equivalent)
The other 1/2 comes from dividends paid out by the stocks I own.
I do not need to sell any stocks to raise cash for living. Actually I can not sell my stocks or the dividends stop coming.

o0o said:

It also pays to be diversified.

On another note, I tend to like to have a moderate portion of dividend growers in my portfolio for exactly these kinds of times. A company that raises dividends 20+ consecutive years (one company in my portfolio has raised dividends something like 52 consecutive years) is a confidence booster -- even if the stock price is lower, it is good to know that one is getting some reward for holding.

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I guess I should stop by the ATM to get some money. I would hate to stand in line just to get food money should the panic spread.

http://www.cnn.com/2008/US/07/13/indymac/index.html?eref=rss_topstories Indymac to reopen on monday. Hopefully this was a isolated event and will not happen to other banks. I don`t know the history of the big crash of 1929...was it panick and a run on banks that started the big drop on wallstreet...or was it a big drop on the DOW that caused the panick and then a run on banks?

It`s good to know our deposits are insured now (within limits) to prevent this type of disaster from happening again. With housing down...stock market down and oil so high...loosing the last of whats left of our wealth in a banking disaster would really suck. :sick2:

Badbeams3 said:

LOL...True, but wasn`t that at the end of WW2?

I`ll admit we have a problem with inflation on the edge of the radar...

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Absolutely, barely on the edge of the radar, nothing to worry about here, folks.

Besides, if anything is really wrong, the government (officials) will give us a heads up first.

daveman said:

Besides, if anything is really wrong, the government (officials) will give us a heads up first.

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In fact the Federal Reserve chairman Ben Bernanke said that he expected some back failures in Feb. The Federal Reserve brought on extra staff to manage taking backs into receivership just for this reason. Anyone completely surprised by this wasn't paying attention.

Federal Reserve has estimated total cost to the insurance fund at 4-8 billion. That's of the about 53 billion in the fund (about 7.5 - 15% of available insurance funds without any kind of govt bailout). With those estimates, 6-12 more banks that incurred a similar cost could fail this week without completely exhausting deposit insurance funds.

As "horrible" as the economy is in the US there has not been a quarter of negative economic growth yet during the current slowdown. The biggest economy in the world is still expanding slightly. That speaks well for the long term of investing in the companies with sound business models and good management. The best description I have seen of the current conditions is "slow motion recession". We didn't experience one big jolt of horrible times, followed by a "no where to go but up" perception. We just linger along with a steady stream of mediocre to bad but never horrible news.

No matter what the stock market does tomorrow I won't take any losses unless I panic and sell when the price is down. (Actually in a lot of cases I would just make less of a return since I would probably still be selling higher than I paid. ) I will still hold exactly the same number of shares as I did Friday morning. Given that most of my investments are long term, this is just a blip. A painful blip if I look only at my statement, but not one that will significantly affect me long term. Financial decisions borne of panic are rarely good ones. In fact the panic to pull savings out of IndyMac is what ultimately killed it through illiquidity.

The biggest reaction to this should be among those who have more than the FDIC insured amount in an account. This should be a reminder that those "safe" investments may face risk well above what the return is, if you are above FDIC coverage with a troubled bank.