Fed Cuts, Bear Stearns, and March Games

Our Stock Market Game has gone on for almost a full year—that was quick, wasn't it? With 15 days left before the end, the market has been tanking, and we have some high fliers and some low-ballers in our game. Percentage gains in one year have ranged from 2.5% up to 32.3%
down (as of today).

IN THE NEWS
Bear Stearns has nearly collapsed, and was snagged by JP Morgan Chase for $2/share, about 270 million. Friday, Bear Stearns was at $30/share. Hope none of you fine folks out there were heavy in banking stocks—well, unless you were holding JP Morgan. However, diversification will get you through this shakeout of the
stock/housing market. What you won't hear much is who's funding this transaction: you think it's JP Morgan chase who's funding the purchase? Nope—the Federal Reserve is funding the purchase of a private company. Not sure if this is the first time it's happened, but I hope it's the last. Businesses, no matter what the size, should be allowed to fail and rise without the intervention of the government or
the Fed.

Speaking of the Fed, they, being the enabling parent to our shaky economy, made another cut this weekend of a quarter-point down to 3.25%. For those of you holding emergency funds in high-yield savings like ING Direct or Emigrant Direct, you should expect your returns to
sink to around 3% or lower.

March Madness is upon us, which means it's time for the obligatory news stories about how much work productivity is being lost.
See

here.

Or here.
Or maybe here.

I think that the complainers are simply (a) worse at picking NCAA pools than the general public, or (b) hitting a popular event while forgetting how unproductive we get on Fridays, the day before long weekends, or when people take smoke breaks or tank after 3pm.

So stay tuned folks. The dollar is weakening, we may be in a recession, and this time next week, your brackets for March madness will be in disarray. Relax. All these things shall pass—and be
corrected for the better.

Our Scary Future? Not so much.

Halloween is nearing, and if you take a look around the world, on the surface things appear pretty gloomy—especially for those who plan to invest in the stock or housing market. Check out this scary quote:

US FED CHIEF WARNS WALL STREET

The weakness in the U.S. housing market "is likely to be a significant drag on growth in the current quarter and through early next year," U.S. Federal Reserve Chairman Ben Bernanke warned.

Source: http://www.cnn.com/2007/BUSINESS/10/16/bernanke.speech/

Ooo..scary.

That is, until you read, the very next few sentences:

But he hinted that it may not get that much worse and that investors and lenders may have learned from their mistakes.

"Rather than becoming more crisis-prone, the financial system is likely to emerge from this episode healthier and more stable than before," he said in a speech to the New York Economic Club Monday night.

Reading that, I know what you're thinking—who goes to economic club meetings? Nah, more likely I hope you realize that the Fed Chair says our dire situation won't last much longer. He hints towards refraining from a rate cut, and I think it's all to the good that he takes that path of action. You see, constantly tinkering with our economy every time it corrects itself does nothing but slows the correction process.

Today's society goes through great length to protect your from risks—toilet gaskets, scares from China, and yes, the Fed will try to interject to save investors from making poor decisions. However, great risk brings great reward—and sometime great failure. However, you are designed to rise from failure, not be destroyed by it. Failure makes you battle-tested—and when people jump through hoops to insulate you from failure, then it hurts even more down the road.

Another hyped craze is the alleged Housing Market craze. (Yes, I know, I've been sucked in myself). However, it's sometimes better to focus on the bigger picture. About 90% of all mortgages are being paid on time an actual homeownership is relatively stable.

All You Need to Know

Look, I'm not saying the road won't get bumpy from sometimes. It doesn't mean however, that you should stop driving altogether. It doesn't mean you start looking for someone to bail you out of your decisions either. All you need to know is to focus on the long-term future and to ignore the weekly scares blasted to you on the news shows every week.