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PANIC is not a good investment strategy ( Archived) (3)

Sep 29, 2008 10:18 AM CST PANIC is not a good investment strategy
During the 1929 stock market crash a lot of people lost their entire life savings due to many factors. The biggist factor imo was in those days anybody could buy stocks with as little as 10% of the stock price in other words, they borrowed 90% of the money. It's called "buying on margin". Once the market sneezed people started getting calls from their broker to deposit more money into their accounts which of course they didn't have because it was all spent already. The brokers had no choice but to sell the investors stocks to rebalance their accounts. This led to further declines in the share price which prompted more selling. A vicious cycle with seemingly no way to stop it. Like a freight train going downhill with no brakes. Back in those days there was no big government with deep pockets to bail out Wall St. All anybody could do was just watch the market crash. To be sure, there were a few people with the ability to see how risky the market had gotten and just stood on the sidelines waiting for the dust to settle and when the time was right they stepped up to the plate and bought companies for pennies on the dollar and became even richer than they were.

That was then!

Today, you need 80% to buy stocks on margin and we have a very big and powerful government with deep pockets and the experience of 1929 to guide us through this rough time. Also, people in general are not like the average guy on the street soaking every last dime into the market like they did back then.
I just flew to Illinois last week and I noticed something very interesting. I was on a total of 4 planes going & coming and 4 different airports and ya know what I noticed? All the planes were full and the airports were all packed. In other words, life goes on, people are going to work and it's business as usual for most of the world. Were it not for the constant drone of the talking heads on television you wouldn't even know anything was wrong.
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Sep 29, 2008 11:07 AM CST PANIC is not a good investment strategy
Dusty45
Dusty45Dusty45Louisville, Kentucky USA57 Threads 3,238 Posts
You're right and I admire your insight.
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Sep 29, 2008 12:31 PM CST PANIC is not a good investment strategy
Why thank you young lady!

I can only hope that people learn from this to live within their means. Having a huge mansion of a house an SUV & a maxed out credit card only makes one look stupid, not smart. There is no guarantee anybodies income won't go away overnight therefore it's imperative to save as much as possible for the day you get layed off because of down sizing or out sourcing or a myriad of other reasons.
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