October 2nd, 2008
Bailout Defeated – What That Really Means
The big news this week was the defeated bailout plan and the stock market immediately answered by dropping more than 700 points. As investors quake and consumers wonder just how safe their money is, this is a good time to look at the bailout and what the failure really means to the rest of us. While the bailout would have been helpful to many banks, some experts are actually pleased that the measure did not go through. Let’s take a look at what all of this means for the average consumer.
Even though the stock market took one of the worst dives it has seen since 1987, all hope is certainly not lost. In fact, early Tuesday morning, it was looking like the markets may bounce back. The biggest issue right now is fear, and there is quite a lot of that running rampant in investment circles. Many are dumping stocks as quickly as possible in order to get cash.
“There’s a monster amount of fear out there. This is global contagion. It’s no longer just the United States,” Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, N.J., told Reuters.
For the average consumer, the dip in the stock market will have temporary effects, but it is too early to judge the long term effects that the failed bailout proposal will have. In the meantime, it is best to consult with a financial advisor in order to develop a long term strategy. By focusing on the long term, investors can step out of the panic mindset and start focusing on what benefits there may be right now.
For example, energy prices actually dipped, which is good news for those eyeing empty propane and heating oil tanks before winter comes. Again, there is no long term indication that these drops will last, but in the short term, consumers can actually benefit from these lower prices.
Bank failures are a big concern, but so far, bigger companies have come to the rescue. Now, the focus has shifted to the fact that around three or four of the world’s biggest banks are now controlling the majority of funds. This could prove to be risky in the future, but for now, consumers funds are safe.
For analysts, the biggest concern is addressing the issues that led to the failed bailout measure and deciding what to do instead. While there is a lot of controversy over whether or not the bailout was even required, and who would actually benefit, the fact remains that there are some serious issues with banks right now, and unless something is done, the effects may be long lasting.
But, for the average consumer, it should be business as usual. Stock markets plummet and come back up, it’s the nature of the beast. Banks fail and new ones are started. By getting out of the “sky is falling” mindset and focusing on good money management principles, the average consumer should do just fine, at least for now.
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Today was a much happier day! Let’s see if the credit markets start to liquefy in the coming weeks.