[Reader-list] "Figures" and "Scenarios"

[Jeebesh]

dear all,
here is a fascinating "advise" on fate of "saving" (money) in moments  
of deep financial turmoil. It's a bit funny, as the only possible  
faith is the State's ability to survive with it's wealth. Rest all  
gone into thin air! If you want to save your ulcers keep your faith in  
the State steadfast :).
this financial crisis is going to sweep the world, many such pedagogic  
ventures will be launched. so please be prepared :). When solid melts  
into air it is very difficult to understand how the solid is going to  
look again.!
Even the gigantic (world biggest) philanthropist and innovator in the  
first whiff of a crisis evokes the hungry to save his empire.
http://www.bloomberg.com/apps/news?pid=20601109&sid=abOlWWazprk4&refer=home

Sept. 25 (Bloomberg) -- Microsoft Corp. founder Bill Gates said the  
U.S. financial crisis would likely reduce support of Western  
governments for programs to combat hunger, poverty and disease to  
which his foundation has contributed $17 billion.

``There are the rich-world economies and the developing- world  
economies and, while the degree to which they are linked is not well  
understood, when one suffers it can't be good for the other,'' Gates  
said in a Bloomberg News interview yesterday after speaking at a  
United Nations event in New York. ``Rich- world budgets may not have  
room for increased generosity.''


It will be interesting to follow the kind of "figures" and "scenarios"  
that get chalked out now.
warmly
jeebesh
--------------------------------
‘Is My Money Safe?’ and Other Questions to AskBy RON LIEBER and TARA  
SIEGEL BERNARD
Published: September 29, 2008
For all of you on Main Street who have been watching the turmoil on  
Wall Street for the last few weeks, Monday’s shockwaves rattled even  
the most steadfastThe day began with the announcement that another big  
bank — Wachovia — had been taken over, just days after Washington  
Mutual collapsed and was sold. In early afternoon, the House rejected  
the bailout package for the financial industry. Stocks plunged, with  
the Dow ending the day down nearly 778 points in the worst single-day  
drop in two decades.

What is a regular investor to make of it all? What about people who  
have money in bank accounts? Below are some answers to questions that  
are probably on your mind.

Q. Why did the stock market fall so far so fast on Monday?

A. The element of surprise surely didn’t help, since everyone was  
expecting the bailout bill to pass. There may have been a bit of  
investor disgust thrown in, too, a sense that our representatives in  
Washington just don’t get it.

Fear may be the biggest driver, however — the worry that it may be  
weeks or longer before companies can get the affordable, short-term  
loans they need to finance their operations. Without easy access to  
that money, it’s hard to run a profit-making operation on a day-to-day  
basis, let alone grow over the long haul. The professional investors  
who often drive big market moves don’t want to hold onto stocks to see  
if things will really get that bad.

Q. What’s likely to happen in the markets over the next few days?

A. It’s possible that Monday’s market moves will spook members of the  
House of Representatives enough that they will be willing to change  
their votes with only a modest amount of compromise. Or, there may be  
hasty efforts to write a new bill from scratch. This will take days,  
however, not hours, since Tuesday is the Jewish holiday of Rosh  
Hashana. Stocks may rebound, at least somewhat, if another similar  
bill emerges. But much will depend on the revisions.

Q. Is any investment truly safe right now?

A. As long as you trust the United States government, sure. Plenty of  
banks, like HSBC Direct and Capital One are offering online savings  
accounts paying more than 3 percent. These accounts have all the  
normal Federal Deposit Insurance Corporation protections of at least  
$100,000. Also, the Treasury Department is currently insuring  
investors who had holdings in money market mutual funds as of Sept.  
19, as long as the fund company pays to participate.

Q. What about Treasury bills?

A. Treasuries are issued and backed by the United States government.  
But since throngs of investors have rushed into these investments, it  
has pushed their yields down. Way down. Some Treasuries, with  
maturities in the one-week to three-month range, are yielding less  
than 1 percent, anywhere from 0.10 percent to 0.50 percent. Clearly,  
many investors are willing to accept paltry yields as long as they  
know their money is secure.

Another government offering is Treasury Inflation-Protected  
Securities, or TIPS, which protect investors against rising inflation.  
That may be one result of any big government bailout.

Q. My retirement portfolio has been wrecked by this. How should I  
respond?

A. Continue to save. Big losses mean you’ll need that much more time,  
or good news, to bring your balances back to where they need to be for  
you to retire comfortably. If your employer matches your  
contributions, this is a great time to take advantage of the largess.

As for whether you should pile into beaten down stocks, no one knows  
how much further the markets will fall or how long they’ll take to  
bounce back. But people who move their savings to ultrasafe  
investments and then leave them there usually miss out on the gains  
when the markets come back. If you need to do that to sleep at night  
or avoid stomach ulcers, then do what you have to do. But it may cost  
you in quality of life come retirement time.

Q. But what if I am about to retire? Then what?

A. Leaving the work force at a time like this creates big problems.  
Not only is your portfolio down, but you need to start withdrawing  
from it. So you are essentially locking in your losses.

If your portfolio has taken a big hit, it may be time to seriously  
consider delaying retirement. Working just a few years more can make a  
big difference. Or, a part-time job may keep you from having to dip  
into your portfolio before it recovers. To get a better idea of how  
much you can afford to withdraw, you can test different amounts with a  
retirement income calculator on the Web, like T. Rowe Price’s.

Q. With things looking increasingly gloomy, though, why not allocate  
extra cash to other types of savings or paying down debt?

A. If you’re saving for a downpayment, you could put enough money in  
your retirement account to match any employer contribution. Then, use  
whatever money you have left for the downpayment fund, which should be  
in an ultrasafe account. The same logic goes for a teenager’s college  
fund, which ought to be mostly in steady investments by now. There are  
nice tax breaks on 529 college savings accounts, too.

Yes, paying down debt, especially high-interest credit card debt, is  
always a good idea, though it’s probably best to take advantage of  
employer matches on retirement savings first.

Q. Is it time to buy stocks?

A. Like gambling? This is a great time to make bets on the wide price  
swings that we’re seeing in some stocks and entire sectors of the  
market. Just be prepared to lose big, as plenty of professionals have  
done of late.

Q. I’m worried sick about my parents, who rely on stock dividends for  
their income. What will happen to them?

A. It’s not a great time to be relying on dividends. We’ve seen plenty  
of companies cut them. (Citibank did so on Monday as part of its  
acquisition of Wachovia’s banking operations.) Still, if your parents  
were planning all along to keep their shares until they die and live  
only off the dividends and Social Security, perhaps now is the time to  
encourage them to be selfish. They could sell some shares and live  
well now, even if it means you’ll get less later when they pass on.

Q. I’m a long-term investor and prefer not to see my retirement  
balances as real numbers for now. So the crisis doesn’t feel like it  
has hit me financially yet. Should I be doing anything defensively?

A. It’s not yet clear how much more the crisis will affect employment  
levels. Still, this seems like the best moment in years to have a few  
months of cash set aside in one of those online savings accounts just  
in case you lose your job or face some large expense that you haven’t  
predicted.

Q. What’s the next shoe to drop?

A. It seems certain that it will be harder for consumers to borrow  
money in the next year or two than it was earlier this decade. How  
much harder isn’t clear yet. It will be more difficult for people who  
need jumbo mortgages than for those whose lenders can simply sell off  
their loans to Fannie Mae or Freddie Mac. Home-equity lenders are  
already cutting plenty of people off, while credit card companies are  
lowering credit limits on others.

Q. What about more bank failures?

A. They will happen. In recent days, we’ve seen the F.D.I.C. getting  
out in front of troubles at big banks like Wachovia and Washington  
Mutual, by arranging for other banks to take over their consumer  
accounts. What’s less clear, however, is how many healthy institutions  
are left to take in other big banks that may run into trouble.

As always, stay within F.D.I.C. deposit limits. Then, the worst-case  
scenario is that it will take a couple of days to extract your funds  
from a failed bank.

http://www.nytimes.com/2008/09/30/business/yourmoney/30money.html?_r=2&hp&oref=slogin&oref=slogin