Washington Mutual Collapses

[fondybrewfan]

If you have three accounts all under the same name only $100,000 would be covered.

[Thurston Fluff]

Why would anyone have $300,000 in cash in a bank anyhow? For a toaster and 3% return on a CD?

 

Multiple reasons. One is diversity. Too much invested in one area is risky despite the higher possible yield.

The second is security. Anything based on the stock market or real estate has a chance of loss not just gain. invest in the wrong vehicle and you lose. Investing in a CD is a guaranteed 3% profit backed by the government. Far safer to have $100 K in the bank than $100 K in fannie of freddie. The theirs is liquidity. Stocks, bands and real estate all take time to pay dividends and that money is tied up until then. The simple and safe should never be looked down on.

 

Plus the toasters are nice.

[bullox]

Chase is assuming all WaMu deposits, so WaMu customers with anything over $100,000 in their accounts are still safe and backed by Chase.

[dadofandrew]

Why would you have over $100K in one bank?

 

People either don't get it, or they are really, really stupid. I've seen 85 year-olds insist they are not in any "risky" stuff even though they've went from $750K to $450K in the last 5 years. Any thought of taking it out is met with a response of "Then I'll miss the rebound"!

 

Tons of people laugh at you when you even mention a bank going out of business...they know the bank president personally, and his dad was the president before him...others may not be safe, but there is no chance of Small Town Bank and Trust losing a dime.

[PeaveyFury]

Tons of people laugh at you when you even mention a bank going out of business...they know the bank president personally, and his dad was the president before him...others may not be safe, but there is no chance of Small Town Bank and Trust losing a dime.

 

I know the point you're trying to make here, but in the current situations, it's the big banks who DIDN'T know their customers that are in trouble. Most of the 'local' banks are probably doing just fine.

[Wesrob1]

aw, that means no more of those funny commercials with those old guys.

 

Sad, the Wall Street that we have now.

 

Yeah, WaMu should've listened to them!

[mothershipconnection]

Small banks aren't in nearly the same trouble because they can react quicker and adapt to changes in the market. Behemoths can't do the same thing, since every change is on a way bigger scale and takes way more effort.

[fondybrewfan]

Down 777 freaking points today!!! The biggest one day DOW loss in history (In Points not %)

 

Are you serious? If lawmakers didn't think this was a crisis already I hope they realize it now.

[RyDogg66]

Good thing I dont have a cent in the market. I barely have any money in the bank for that matter as well.

[Chio151]

I blame all of Washington equally (NOT GETTING POLITICAL). The issue is that they set expectations of a bailout. Credit markets then dry up with investors waiting to see if they are getting a raw deal that week since the game changes the next week. Then, when it doesn't happen, people start to freak out.

 

It would be like if during a gas shortage a gas station announced they were considering offering gas for a buck soon. Everyone started waiting outside that gas station and getting angry. All the other gas stations would be sitting empty, knowing that another week without selling gas could bankrupt them. Then, all of a sudden, that gas station said they couldn't do it. Everyone would be panicked that there is very little gas left and it's expensive. They would be stockpiling goods and hunkering down. Biting each other. Cats and dogs, living together.

 

Lesson learned: Gas and Subprime mortgages are bad.

[homer]

Good thing I dont have a cent in the market. I barely have any money in the bank for that matter as well.

You don't have a 401K? IRA?

[fondybrewfan]

All I can say is Thank Goodness I am 25 and not 55. I have plenty of time to recover from this. I just hope all near retirees got out in time or atleast switched over to some money market funds. I recently transferred 15% of my 401K to a money market. Now I am thinking that I didn't move enough. Every time I think the market has hit bottom it keeps going lower.

[dadofandrew]

If you're 25, I can't think of a reason to not have 100% in the market. Planning on a 40-45 year bear market is your only hope, and if you feel that way, I think I'd invest in ammo, weapons, and MRE's.

[JJHardy7]

If you're 25, I can't think of a reason to not have 100% in the market. Planning on a 40-45 year bear market is your only hope, and if you feel that way, I think I'd invest in ammo, weapons, and MRE's.

 

Al, I see what you're saying, but being 25 you don't have a ton of money you can 'lose'. The market is crap now and there's no reason most people in their young 20s should invest in it. I personally am 24 and my wife and I save money every month that is just going in CDs. We have good jobs and make a decent amount, but IMO I keep telling myself get xyz saved up in CDs and such before dealing with the market. I have a 401k and I dread seeing my quarter results in the next week or so.

 

I think your point Al is that investing is good and it is, but not having a diversified portfolio could be similar to lighting money on fire. It all depends on the company and the situation. Those that have extra cash laying around would be able to buy stocks at what I hope is close to the bottom level of their prices.

[homer]

All I can say is Thank Goodness I am 25 and not 55. I have plenty of time to recover from this. I just hope all near retirees got out in time or atleast switched over to some money market funds. I recently transferred 15% of my 401K to a money market. Now I am thinking that I didn't move enough. Every time I think the market has hit bottom it keeps going lower.

There are theories out there that 401K investing is what drove this market crazy in the first place. Not sure I buy that but in any case, if you're 25 there is no reason to start moving your retirement money to money markets. The market will rebound, it always does. It may not be this year, heck it may not be five years but if you start getting conservative you will lose out in the long run. 401Ks are instruments you tune up annually - not when the market tanks. Unless you have that money earmarked for something in the next two - three years you should leave it where it is. Of course, some people can't handle the swings (which is fine) and so then cash or money market is the way to go but realize that you will lose out on gains in the long run.

 

(and do some research on the web before listening to me. I'm just a schmuck that worked at mutual fund company for three months and read the Wall St Journal Guide to Investing during down time).

[PeaveyFury]

Al, I see what you're saying, but being 25 you don't have a ton of money you can 'lose'.

 

I think Al meant in the 401k, not every cent he has.

[dadofandrew]

You're 401K should be for your retirement, hence the 40+ years away part.

 

Short-term savings should be nowhere near stocks.

[pitchleague]

I just got my quarterly and annual statement just last week. It wasn't pretty.

 

I'll stick with it because, for the most part, that's what you're supposed to do. But it is very rough seeing a ton of money that you have invested over several years being wiped away in a couple of months.

[mothershipconnection]

The logic of investing in the stock market and stubbornly sticking with it "for the long haul" may be seriously doubted now. Look at the "growth" of the Dow since late 2003, or even if you got in during 1999 or 2000, and then look at the return you'd have if you found a secure investment growing at the meager historic inflation rate of 3.5%.

 

On a molar level, you'll still probably come out ahead in the stock market if you're young, but if you could predict activity well, you'd divert money away from stocks to conservative investments at bad times and return when indicators look better.

[dadofandrew]

Big difference between 10 years and 40+. If you're 10 years away from retirement, I'd say a good amount would probably be 40-50% in the market.

[mothershipconnection]

That's not what I'm saying though. I'm saying that if you really had a grip on the market and bailed for safer investments when the market peaked, then re-invested when it bottomed out, your aggregate gain would be way bigger than if you just "ride it out" forever. Someone who got out at the peak/bubble in 2000, then pumped back in when we'd seemed to recover post-9/11, then bolted a year ago when they saw the garbage housing market's implications would (obviously) be far ahead of someone who stayed in. Analyzing almost anything requires both molar and molecular analyses.

[pitchleague]

my broker left an answering machine message to congratulate me for the Brewers making the playoffs and gave me some good ideas to think about for the next month. I'm not at liberty to discuss these, but I did think it was nice that he thought of my wife and I and had the kindness to let me know about some stuff that would be upcoming, especially when so many people are trying to get out. Plus, he's a Cubs fan, so it's doubly appreciated to hear a congratulatory message.

[JenksFan5]

Mothership - if you could time the market perfectly or even fairly well, you would/could come out way ahead, but statistical data shows that very few people do this well and usually achieve a return inferior to an account that was well-diversified and rebalanced over the long haul.

 

Now is absolutely not the time to get out of the market. I am currently putting as much money as I can into the market. Am I buying at the low point? Probably not, but I know that I am buying at over a 25% discount from its height in Oct 2007. My money is buying more shares right now than it was a while back and when the share price rebounds, I will in effeccct have more money as a result. If you haven't cashed in the share, it still has value. People 30-40 years from retirement should not be reserved in putting there money in the market. This recent decline will just appear as a small blip on the radar over time. It is hard to untie your emotions from your 401k/investments, but getting out now would be foolish in the long haul because chances are the rebound will have already happened when your emotions tell you it is safe to get back in. As a result of emotions controlling your investments, you decided to sell low and by high. A classic mistake made by investors.

[mothershipconnection]

Agreed, I'm putting money in now, but I kept far away last year when foreclosures were happening all over and the market still somehow looked good. Instead, I used that money to pay down mortgage and student loan debt a little to save the measly 6.25% interest, but that looks like a pretty shrewd move now. I'm absolutely nowhere near being financially fluent, but there are times when a moron should see what's coming.

[JenksFan5]

Good for you mothership. That is just common sense financial planning which you appear to have an excellent grasp on. I am talking about long-term investing after your debt-load is under control and you have an emergency savings built up.

I was just commenting mainly on your market timng comment in specific with the first small paragraph of my post. The second paragraph of my post was not directly related to your previous post at all, just general advice for a lot of potential young investors.