Now, you can panic
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Politicians hate to admit that anything is ever wrong with the economy. Even as they pass “critical” packages using the economy as an excuse, they continue to maintain that everything is just fine. Please go on with your life and please, please, please, keep spending your money. Every financial advisor who has been in the game long enough to know anything has watched as the Bloomberg reporter asks a political appointee how they feel about the terrible numbers that have just come out that are far below every expectation on the street only to hear the shill (sorry) political appointee go about explaining why the numbers aren’t bad at all, in fact, they are just fine, and everyone just has it wrong. You can always spot the newer journalists by the way they try and help the politician understand that the numbers are in fact terrible.
So, when President Bush showed up on T.V. today to announce that yes, the economy is bad, eyebrows were raised. Once again, there is nothing to do here investment-wise as long as we are talking about long term investments like your retirement and college savings. The whole point of re-balancing a diversified portfolio on a regular basis is that it takes care of all of these short term ups and downs and keeps you on track for getting the return you need. Panicking and moving your money now, is how you end up not getting anywhere near the 11% the market historically returns. Still, it does raise an alarm of sorts. Now is the time to start building up your cash reserve, especially if you are in the kind of job that doesn’t seem as secure as you would like. Also, now is probably the time to put off remodeling, taking big vacations, or buying a new car or wardrobe. Let the other sheep out there spend their money to keep the economy rolling. You should be assuming a defensive position. Hey, if nothing happens, then in three or four months you’ll have extra money, and then you can take that vacation.
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