Feast or Famine?

October 10, 2008

Well, well, well, my, my, my. The dow closed down over 675 points yesterday, and over 1500 down so far for the week. All the media is abuzz with the doom draws nigh and this is the end of American capitalism as we know it.

In terms of full disclosure I must disclose that I am not, never have been, and have no desire to ever be one of those “financial see’ers” who makes their living off giving others financial advise. I do have the 401k’s 80% into stock funds however and yeh, though I’ve had quite a percentage loss these past few weeks I’m not pulling out, I’m not running, and quite frankly I’m sick and tired for all the negativity.

Yes, this is a mess, yes we’re probably headed for a recession, yes, trillions in paper wealth has been erased, yes, yes, yadda, yadda, yadda.

No, this is not the end of American Capitalism and no, the sky is not falling. While there is still much work to be done, the work needed has been identified and will proceed accordingly. It will not be fast nor please the markets immediately but it will proceed and we will all survive.

Whatever comes of the meeting of the G7 finance minister’s this weekend, just the fact that they finally see they need to act with concerted effort is good news. For this is not just a problem with the U.S. sub-prime mortgage defaults and the housing mess, it truly is a world financial credit crisis and the lack of that free flow of credit between not just U.S. banks but world wide institutions as well. And while the Europeans love to deride America for her excesses, they dearly love their own form of capitalism as well and will take the necessary steps to ensure all prevail.

Personally, I’m actually glad it finally happened. Any one with even a couple brain cells left could have seen this train wreck coming. In fact many did, in fact many warned, yet we were all on a binge and it was such great fun. Those shouting the warnings were like the parent’s coming home early and breaking up the unauthorized teenage party. Bummer man.

There was no way the Dow was going to be able to maintain the 14,000 threshold of last year and even the 12,000 range had strain. So here we are, down to the 8500 level. Low yes, but not a sustained low. Common sense will return and many will realize the huge bargains now to be had as many, many stocks have been thrown out with the bathwater in this race to the bottom.

The only thing that will be the “death of American capitalism” is if in a year or so we haven’t learned our lesson. If we continue to outspend our means we will deserve to drown in our own debt. We’ve been thrown a lifeline this time and from that we must learn the most important lesson of all: There is no next time.

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