Oct 8th, 2008
We are NOT on the brink of financial apocalypse and Jim Cramer is a fool
I have written in the past that Jim Cramer is scum and yesterday was no deviation. He said on the air yesterday for people to sell their investments and stash any cash you need for the next five years. There is no question the financial market is essentially in ruins right now but there are a bunch of reasons not to pull out.
1) Its dangerous - for you, for me, for the entire country. A run on the stock market is just like a run on anything else: it disrupts the economy and is bad for everyone. If I take all of my money out, it will drop and further push Joe to take all his money out which creates a bigger drop and so the cycle continues. There are some things in place to make sure there is not the kind of massive crash that happened on black Tuesday but essentially our biggest enemy right now is fear.
2) Regardless of what happens right now, the market will go back up. This is not the case for each individual company, but assuming you have diversified investments and are invested in index funds, you will see brighter days in the future, I promise.
3) As of this writing, the dow is under 10k and you and I have both already lost a massive amount. Unless there is a total and complete collapse of the markets I think the probable bottom of the market is not too far off.
Let me reiterate: Despite what you might hear, we are NOT on the brink of financial apocalypse. History will not repeat itself.
When the risky lending of the 1920s happened, there was a striking difference between what they were borrowing against and what the risky lenders of today have borrowed against. I was fairly shocked to learn that in the 20s the risky loans were borrowed against STOCK. Thats right, something that has the ability to go to absolutely zero worth.
Now lets contrast that with the ridiculous lending thats happening today. The risky loans were put up with REAL ESTATE as collateral.
Lets put two and two together: we cannot replicate conditions leading to the great crash of 1930 unless real estate value goes to absolute zero. This has never in history happened….quite the contrary land is the one thing throughout history that has held some sort of value. Though the real estate is overvalued and correcting, it will not go to absolute zero.
Another huge difference is that back then there were absolutely no insured deposits. There was no FDIC. People that had any money in banks and were unable to withdraw it lost everything. Thats simply not possible today.
There have been tough times before (Tech crash anyone?) but do not panic. Stay the course and stick to personal finance fundamentals: reduce debts, save, invest, and keep your head above water.
- 8 Comments
- Investing
Jim Cramer is an idiot. He is wrong 90-95% of the time with his stock picks and he is wrong now. Thanks for taking the time to expose this jerk!
I actually saw that show, holy cow is that scary! I mean it made me consider at least taking some out.
Jim Cramer is on the very low end of my guru list. However the 5 year point has always been true…in fact I’d make it money that you’re saving for any time within the next 10 years shouldn’t be in stocks. Maybe bonds.
Unfortunately, he doesn’t deliver this kind of thing well or leave people with a good impression.
And he probably contributed to people having their short-term money in the market in the first place.
(good article about him on Writer’s Coin yesterday, btw.)
Cramer is a complete and utter idiot! He just proves that you just need to be loud to be on tv.
The most I’ve seen of Jim Cramer is a few seconds here and there when I’m exercising at the gym. So I can’t judge him one way or the other.
That said, the current financial crisis is far more complicated than housing, mortgages, and lending practices.
While I respect your conclusions (that we are not on the brink of financial disaster), I take the opposite position: We will witness the collapse of the American Empire in our lifetimes.
I agree the markets will come back, albeit slowly. The feds money spending will certainly take its toll, in higher taxes among other ways. But to withdraw all your money? Yeah, I don’t see how that is good financial planning.
This nation is certain teetering. Mr Obama and his spending is only compounding the problem. I wish the feds would shut down for a couple years.
The nation is absolutely in a precarious position by the debt racked up by the feds, medicare and social security basically being broke and the interest on our debt. The U.S. is not going out of business but better days are not ahead until we get some fiscally conservative leaders in Washington who think about our nation’s well being instead of succumbing to corruption. They are projecting a $9 trillion deficit. George Bush was hammered in the press for a half a trillion deficit. Go figure.