Weekend Wisdom: There are no fire escapes...

"As life closes in on someone who has borrowed far too much money on the strength of far too little income, there are no fire escapes."  John Kenneth Galbraith (1908 - 2006)

The economic house of cards began to burn last week and market participants were running for the exits.  Since last Friday, the Fed and Bank of America have doused the flames in an attempt to calm the market.  Can the economy, financial markets, and their participants begin to move forward again?  Will market participants get "burned" again by seeing an illusory "fire escape?"

We'll begin by looking at what history tells us about "Fed easings."

Lower rates usually means rising stocks.

Investors are anticipating a Fed rate cut but don't bank on it...

Betting on a move by the Fed to cut the Federal Funds Rate could be harmful.  Here's five reasons they won't cut rates anytime soon.

As Capital One shuts it mortgage operations, experts say more commercial banks are teetering on shaky ground...

Who could be subprime's next victim?

Financial institutions are cutting thousands of jobs.

U.S. stocks are under more pressure after real-estate foreclosures almost doubled in July and the credit crunch appears to loom in months ahead...

One lesson, among many, to be learned from the market volatility should be patience.  If you looked for a "fire escape," you may have been burned.  If you look to jump back into the fray you could be burned again.  Perhaps you are slowly and methodically buying into the weakness of financials and real estate...

Passive management is wise, but there is also a place in your portfolio for prudent, active management.  In this market, money managers should excel while Wall Street learns the hard way that human judgment can not be replaced by computer algorithms...

Here's five funds to help you sleep at night...

Have a nice weekend...

TFPAuthor, Kent Thune, is the President and Owner of Atlantic Capital Investments, LLC (ACI), a 'fee-only' Registered Investment Adviser firm located in Mt. Pleasant, SC.

Comments

[Dereck]

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Dereck

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[The Financial Philosopher]

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