Tuesday, January 22, 2008

Extra! Extra!

Is it time to start panicking yet? Since when does the Fed do emergency rate cuts? I haven't been following this for long enough, but this is the first one in my memory. Are we in the midst of a dead cat bounce, or is the cut actually working?

I'm not looking forward to the drop in the interest rate my HSBC account pays. My mother will almost certainly be dismayed by the performance of the IRA she funded just before filing her 2006 taxes. She's been talking about getting out of her fairly conservative Vanguard 2015 target date fund and into something "safer" for months. When you consider that every other penny my parents have, including my father's 401k, is in something with guaranteed principal and little growth potential, it seems a little silly to be worrying about market volatility, but they appear to have a risk tolerance of zero.

3 comments:

SJean said...

I heard on NPR that the last "emergency" rate cut (when they weren't already meeting) was after 9/11. Hmm...

Jim ~ mydebtblog.com said...

It is just panic because when the US markets gets the hiccups the International markets do even worse. They can hack and slash any rate they want and give us money back, the markets will balance themselves out. Since you mentioned 9/11, the drop we experienced had recovered 59 days later as it was on 9/10. We're not in a recession there is just slower economic growth right now.

People getting nervous are the ones who are retirement eligible and looking to use their money. Now isn't the best time to take money out, but you have to do what you need to do, that's why it is there in the first place. I think personal debt is going to be addressed now more than ever because when things like this happen spending goes down. Only time will tell what is going to happen but I feel that it will recover just fine.

Blubba said...

I think the decision about what to do with your money hinges on your level of risk-taking and how long you are looking to invest. It seems like this year is a good time to double-down if you're looking long-term, as stock prices are likely to be depressed due to all the panic.