While it seems like everything is going to hell in a handbasket (what does that mean anyway?), not all is lost.
Here are a few things to keep in mind. The dollar is up, not by a lot and it could certainly reverse and drop again, but it appears it has hit its lows. Oil is down below $100 for the first time in five or six months - this is huge - oil has fallen over 30% in the past five months. Interest rates are low (bad for people trying to generate income) for those who are borrowing and home prices in most places are finally reasonable again......if only those people could get a loan!
The Lehman bankruptcy is a good thing. Yes, I said a good thing. Did you notice that Lehman went Bankrupt and didn't get bailed out? Finally a financial institution that the government didn't bail out (makes one wonder why Bear Stearns was). Did you notice that Merrill Lynch didn't go bankrupt? It was bought by a strong bank. Yes, there are banks in the US that did not fall prey to sub-prime mortgages. While Washington Mutual teeters on the edge of insolvency, Bank of America is spending $50 billion to buy Merrill Lynch. JP Morgan is strong, Wells Fargo is strong and US Bank is strong - not to mention several regional players. The banking system is in turmoil, don't get me wrong, but we can survive this crisis (though not without some big bumps and bruises and additional regulation).
Yes, stocks are down, but that was inevitable as traders work out their trades - the fact that we are only down a few hundred points is a good sign. Don't think that things can't fall further, they always can, but it is still the right thing to hold on.
A well diversified portfolio if held through the hard times will serve you well long term. Bear markets are temporary, those who panic and sell will regret their decision. Having said that, you should also have a reasonable asset allocation to begin with.
Things aren't all rosy, but things are not all bad either. Don't let all this financial turmoil give you an ulcer (that's my job), go on with your day and remember the things in life that really matter.
I don't know when we will begin to recover from this latest bear market, it could be months, it could be years, but recover we will. Remember that.
Scott Dauenhauer CFP, MSFP, AIF