Tuesday, September 30, 2008

Into everyone's life a little bad economy must fall

I was either extremely fortunate or psychic to pick my BigFinance firm coming out of B-school. I'm going to go with my predictive powers just because I can pat myself on the back that way :-) I am also fortunate that I work in transitions (aka acquisitions) so there will be plenty of work for me over the next 18-24 months. So while the other BigFinance here is not doing so well I should remain gainfully employed. A definite factor when considering I will be taking maternity leave at the end of March!

But, like the rest of you, I'm sure, I have not been so lucky with my financial portfolio. It's not like I don't expect to work for another 30 (eek!) years but losing 1/4 of my retirement savings is making me nervous. I know, I know, the market is awful for everyone...but it makes me feel like the past 7 years of savings was for naught. I should have just taking the cash and put it into CDs! Yes, Mommy's Esq Husband, I know that it's better to put it into the market, but it doesn't make me feel any better.

The last big market blip for our generation was the Internet bubble bursting. I survived 4 layoffs at SmallResearch and I was even in sales at the time. Husband is still there and it doesn't sound like there are going to be any immediate layoffs. But the last blip didn't affect the overall soundness of the market. I never felt like things were spiraling out of control. And that's what is particularly scary about this credit crisis. I am far from a financial expert (even with B-school) but I do know if banks can't lend to each other we are going down a path we may not be able to recover from. The delta between the Fed rate and LIBOR (what banks use to lend money to each other) is 3.5% when usually it is lest than 1%. That is a huge swing and indicates that banks are leery of the financial stability of other banks. Not good. Interestingly, financial firms pressured the government to allow deregulation and now we are in serious trouble. Hopefully the recent consolidations and failures will slow down and the market can start to correct itself. But until there are buyers for the iffy mortgage backed securities, there will be no market correction. The politicking with the package proposed by the Treasury Secretary is driving me nuts. The economy needs the bailout. It's that simple. Do I want to be paying for others' mistakes with my taxes? Heck no. But better that than even more bank failures and job losses.

One thing we have to keep in mind is that money is still really cheap. Yes, really! Think about it. When our parents first bought their houses in the late 70s or early 80s, they were paying interest rates in the double digits! Can you imagine paying a mortgage with 17% interest? No way DH and I would be living where we are now if that was the case. Of course, home prices were a lot lower then too, commiserate with the higher interest rates. So now people expect low interest rates which is why everyone freaks out when the Fed raises rates. But if it wasn't for cheap credit, people wouldn't have interest only loans and the rate of default wouldn't be as high!

Ok, enough of my financial rant. Like I said, I am far from an expert on this. I can only hope that the market corrects itself in the next 2-3 years (yes, I think it will take that long) and I stop losing so much in my portfolio!

DH and I have not noticeably cut back on expenses yet. We haven't been worrying about losing our jobs or not being able to pay for the baby supplies. What about the rest of you? How nervous are you? What about your parents who have to be close to retirement (if not already there)?


Natalie said...

i think your blob might be too smart for me. Big words, scary topics, I want my mommy.

Natalie said...

and by blob i meant blog. see, i can't even spell good.

barbashlack2 said...

Yeah...Stacey what Natalie said. I was expecting the dl on the latest gossip girl episode or at least a review of a bosom-heaving romance novel....Only thing to add is that our neighbor's condo is going into foreclosure....so if anyone wants to move to LA and live next door to me, Geoff and the amazing Laney (our puppy)you can buy a great condo for ~150K less than we did a year ago....

Mommy, Esq. said...

We have increased our spending. That is what happens when you have kids. At least we don't eat out much. But the kids might drive me to drink more.

I agree that the market will correct itself within 5 years. This is a fantastic opportunity for us in our 30s - old enough to have some disposable income to invest and young enough to not worry about risking it. Husband and I are investing more now while things are cheaper.