How have we been affected? For one thing, home prices have fallen off the cliff from inflated levels. That means wealth contraction as most everyone's single largest asset is their home. What else? We've seen massive layoffs by small and big companies alike. That means less stable income stream and thus contracted spending. Furthermore, people are worried. We read about companies going bankrupted. We hear that banks aren't lending. We see our credit card interest rates skyrocket. Panic is literally in the air.
The air of fear is prevalent and heavy. Everyone and his dog (love that phrase) are paranoid that we're entering a prolonged period of recession, if not depression. We hark back to memories of the tech bubble bust and 9/11 and remember the pain, both physical and emotional. Those were trying times.
This time, we're involved with a more opaque subject. Credit crunch. Main streeters don't exactly know what this means. But, get this, it's been with us for a year. During this past year, believe it or not, financial literacy has blossomed. People are more concerned about their finances than ever before and thus are more engaged. All of my friends have talked about the economy, unemployment, stocks, etc. These are folks who in the pass have deferred this topic. And, now, they are engaged! This is great!
It's great because we have involvement. Yes, folks may be decreasing their retirement contribution rates and may have altogether stopped contributing. Yes, portfolios are suffering huge declines. Yes, things are bad. But, the thing is (and this is key!) things will get better. And when this thing turns around, we'll be so much more better than before. I expect a wave of new money to come into the markets. I expect people to be more educated and picky and will not go with the same gimmicky investing/trading they've done in the past. Yes, I do expect a new bull market. And, I for one can't wait.
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