[QUOTE=Bing in Buffalo;2796545]I'm down over 20K in 1 week- time to liquidate? HELP!!!!![/QUOTE]
I'm not a financial advisor and it's up to you to decide what to do but I'll throw out an opinion....
Don't liquidate. There certainly could be a snapback rally and there certainly could be more downside. But, if you want to protect yourself from further declines you can buy an ETF that goes up in value as the market declines or you can buy a PUT on the broad market averages.
I was in a similar situation at the end of September around the time the bailout was being kicked around in Congress. I didn't want to sell my stocks but I feared a bad selloff. So, I bought a PUT option on the S&P500. It is up almost 300% and is slightly offsetting losses. I'm still down a lot but this is taking the sting out of it.
[QUOTE=bitonti;2796561]I am still optimistic. this is irrational fear that is not that different than irrational exuberance.[/QUOTE]
What are you optimistic about though?
I agree there is panic and it could be overdone. But the fear may not be irrational. GM likely is going out of business in the next 3 weeks IMO. It's not a bank, it's not a brokerage, it is a American icon that has fallen on hard time and is now priced lower than it was during the crash of 1929. This just shows me that the bleeding is extending quickly to other areas of the economy. People aren't buyin cars....they're also not likely to buy more iPods, or vacations, and may cut back on services like premium channels on cable/satellite, etc. In other words, there is a HUGE negative wealth effect right now.
Between homes and the stock market, we are seeing a destruction of wealth like has never been witnessed before in this country.
Take an average guy, Joe American. In 2003, he may have had a $450,000 home with a $350,000 mortgage and a 401(k) with a $250,000 balance. Net worth (back of the napkin not including other things) = $350,000.
Today, his house (hopefully) is worth $350,000. His 401(k) is down to $175,000 and his job may be in danger. His net worth is $175K and he's thinking about how he will fund college, retirement, etc. He is not buying a new LCD next week and he's not letting his teenagers spend $100 at Abercrombie & Fitch. So, the cycle continues....fewer LCD's will be made so Sony's profits will drop, they will lay off a couple of thousand, etc.
The stock market is a forward looking indicator. It's not a rearview mirror and, right now, it says things aren't looking good in the months ahead.
[quote=Bing in Buffalo;2796545]I'm down over 20K in 1 week- time to liquidate? HELP!!!!![/quote]
That depends on your age. If you are close to retirement, you may want to cut your losses and liquidate.
If you are not close, it's probably too late to get it out of there. Most of the damage has already been done. At some point, it will go back up and if you are not riding that wave, then you lose TWICE- once on the way down and again if it goes back up without you.
I am 50 years old and have 100% of my 401K in a stock fund indexed on S&P. I am letting it ride and hoping for the best. Over the long term, the stock market has averaged good returns.
[QUOTE=pauliec;2796596]What the hell was the bailout for???[/QUOTE]
So Congress could say they did something.
But, in all seriousness, the bailout is not for the stock market. And, even if the credit markets were thawing (and they really aren't quite yet), it doesn't mean that this economy isn't slowing dramatically. The stock market is reflecting that.
Also, the bailout has been passed but not implemented yet. The Treasury hasn't bought a single security yet and probably won't for a couple of weeks.
[QUOTE=jetstream23;2796580]What are you optimistic about though?
The stock market is a forward looking indicator. It's not a rearview mirror and, right now, it says things aren't looking good in the months ahead.[/QUOTE]
short term there's still a ton of money out there and people are still investing it
also short term the volatility is very very high which means it can snap back quick
end of the day you are looking at the stock market with a bias toward upside
and from that point of view it's pretty grim i will agree
but there are shorts and straddles and strangles and all these other strategies to make money on the way down... it's riskier but if you get it right you make a buck...
even a pure upside strategy can make money if you are risk trading, investing in gold mine (literal) companies ... there's a symbol SKF on the Amex "Proshares UltraShort Financials" that went up 28 bucks today. another view to take is the beaten down stock and double up - for example if you bought Wachovia Bank WB on Friday morning around 3.50$ and sold it friday afternoon at around 6$ that's very serious return on investment.
please note Im not recommending any one particular security - im not an analyst and truth be told Im taking the long view, my sports betting account gets more action than my stock account - but you have to think outside the box in an environment like this - and there are winners you can bet on that.
two more pieces of advice, panic is not an investment strategy and if you sell out now you never get a chance to recover the loss.