Tag: sub-prime

  • No Need to Panic

    The financial meltdown on Wall Street “is like deja vu all over again,” to misquote Yogi Berra. Somehow, these once in a lifetime or once in a century financial crises keep occurring, well before the century has run out. With 1999-2000 still fresh in mind, we all have some frame of reference for understanding how this entire debacle will unwind.

    First, the companies that you’ve never heard of will fold. We cruised past that stage about a year or so ago when all the small mortgage brokers started closing shop. Once this occurs, the grim reaper starts knocking on the door of the big boys. Any flight to quality is illusory. As we’ve all seen, even the industry giants will take their lumps. 8 years post-bubble, Cisco is still selling at roughly 1/4th of its year 2000 peak. Microsoft took a beating. GE took a beating. Everyone took a beating, well, except for Apple who has soared well past their year 2000 highs, but Apple is a special case.

    In the financial realm, we’ve seen the dominoes starting to topple: IndyMac, Fannie Mae, Lehman Brothers, AIG, etc. And, as we’ve seen before, no one has immunity, not even Goldman Sachs. They’ll take their beating as well. However, we all know that Silicon Valley survived the bust and bloomed again with new roster of companies leading the charge. Wall Street will rebound once the bloodletting is done. For college students entering their senior year, make alternate graduation plans. The companies you are interviewing with this fall may not be around by next summer. Working for a big company does not necessarily offer more safety than smaller one. Until then, keep an eye out for the next bubble.

  • Interest Rate Cut

    The Fed’s second interest rate cut in just over a week really confused me. Instead of being merely aggressive, it appeared a bit desperate. Perhaps, the national economy is faring much worse than I had believed. The problem for home owners and real estate investors is that our perspective is often local. Easy to tell how we are doing, but difficult to see clearly how others are doing. So long as we have a roof over our heads and a steady job, any recession does not seem too bad.

    If you live in an area tha has not been affected by the sub-prime crises, you might be thinking that your area is different. However, it is difficult living on an island and eventually what happens to others may also happen to us. Make sure you have sufficient savings to ride out this storm.