panic button

And where's there?

| It's now official — this is the worst stock market correction since 1900.

stock market corrections
Stock market corrections

The Dow Industrials reached its peak exactly one year ago and is now down a hair shy of 40%. At some point it is going to reach bottom and then start going up. The question is, Where's the bottom? Bottoms are often signaled by capitulation, the point at which all but those with the steeliest of nerves are driven out of the market. Think of it as an enema, flushing the investment system. The problem is, there have been several of those big sell-offs in the past weeks, opening the question of just how much farther we have to go to hit bottom.

This is a moment of truth for American style capitalism, based on the belief that left to its own devices an unfettered market will work for the public good. We now see how well that worked out. Profit has been privatized and risk has been socialized. In the laissez-faire climate of recent decades the rich have gotten very, very rich — and the government (you and me) will now have to pay the consequences for the orgy of risk-taking. An editorial in this morning's New York Times summarized the situation nicely:

At last count, 12 million homeowners had zero or negative equity in their homes. Millions are in some stage of foreclosure. Retirement and other savings, for those Americans who have them, are being decimated, and unemployment is rising. Consumers are recoiling, an understandable reaction, but one that will reinforce the downward economic trend. There surely are more economic shocks in store, among them, corporate defaults and state-government budget emergencies.

How we will emerge from this crisis is not yet known. But we know how we got into it. The question — which is about to be put to the voters in November — is whether the nation will learn from its mistakes, or whether the deregulatory, anti-government ethos of the last several decades will be alllowed to reassert itself when the economy begins to recover.

Editorial - Building a Better Bailout - NYTimes.com, Oct 10, 2008

On a personal level, it has also become a moment of truth for me and for other retirees. The same questions now have to be faced all over again: Will the money last? If not, now what?

I based all my retirement projections on the assumption that I would live to be 91, and the calculations showed that I could live well and happily die almost broke. Oops! Anybody know some good recipes for beans and rice?

Mike Luckovich
Mike Luckovich

Last updated on Sep 9, 2016

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