Think back to October 2007, when we hit the all time high of 14,164 - quite different than the economic climate of our country and world today. At 6547.05, we're at forty-six percent of only seventeen months ago. Back when we started this downward spiral, all the experts were in a state of denial, and to some extent, still are. They kept saying how things were only going to get better, even though all of the signs said otherwise.
So while I don't want to be a bringer of doom-and-gloom, I'm here to say that the worst is yet to come, and by that I'm talking sub 5000 numbers, possibly as low as 3000. Back when we hit around 12,000 I restructured my 401K and got out of anything with stocks and moved into the low risk bonds. The transaction fees cost me less than what the market swings in my account seemed to be doing daily and was therefore well worth it. I've had family, friends and co-workers look at me puzzled when I first brought this up, only to see them distraught over their retirement savings.
One person told me I was stupid and should wait it out because I'm so young and could then be there when the market hits the low point to buy again for my future. While this holds well traditionally, with the losses we've had and the losses I expect to continue it would basically be throwing my money down the toilet. A good rule of thumb is as follows - if the money you are losing in the stock market, percentage wise, is less than the amount your employer contributes, then you should re-invest that money, either by paying down debt, or moving it into an alternative market that has minimal gains and at the very least reduces the amount being lost.
I've seen my company's stock drop nearly $70 from its all time high along with that of my wife's. Other companies like Citigroup have gone from over $55 per share to under $1, with Citigroup hitting a low of $0.99. At $93 in the year 2000, GM has, on the verge of bankruptcy, nearly bottomed out as well to $1.68 today and a 75 year low in price when it hit $1.51.
There is no joy from seeing the retirement funds of others magically vanish, or that of companies failing and workers losing jobs. There is, however, a way to be proactive when seeing such trends and by taking our head out of the sand, we can prepare for the worst case scenarios, so that if they come, we are ready, and if they don't, we'll be that much better off. The government and top economists aren't doing anything to help us right now. President Obama isn't worring about the ups and downs about the stock market, but in fairness, that isn't his job. Rather, the economic advisors should be focusing on policy to work with those on Wall Street and the investor class. The rich aren't the only ones losing money here and many middle class Americans are relying on a robust 401k and possibly a pension to supplement any menial amount that Social Security may provide as safety net come retirement.
There's plenty of blame to go around - Politicians on both the left and the right in the legislative and executive branches, "greedy" fat cat Wall Street types, CEOs and mortgage companies to name a few, but also us, Americans who've lived beyond our means by purchasing too much house, refinancing one too many times and racking up excessive debt on plastic. The next decade is going to be a tough one. Lets start by doing as much as we can, person by person, family by family to get back on track as soon as we can.
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