Today the most serious crises to affect almost everyone. Some lost a lot of money, savings, 401K and other investments. Seems like in January, we noticed that something was wrong. But no one expected closures of banks, Dow Jones loses mouth opening and other negative economic turmoil which is not yet over.
In September, more events, like the government, Fannie Mae and Freddie Mac, seized and rescued American International Group, as the bankruptcy of Lehman Brothers andpending sale of Merrill Lynch, could carry a series of bank sales, and a federal bailout plan with a $ 700 to $ 900 billion price tag.
Economy:
Although everything seemed so perfect in this prime mover of the money, did something go wrong. In 2001, just after the Internet bubble, the Fed was afraid, we go after the recession, the reason was their answer to the price slash up to 1%.
This opened another door. 1% mortgages with introductory rates, adjustable-rate mortgages, interestonly loans are quickly as you get into a loan put in place "in most cases, without qualifications, such as taxes, pay stubs, etc.
Wall Street investors better idea of the creation of tradable bonds in these risky mortgages, mix it with another loan with a good rating, and sell them. Bond rating agencies a very high rating on the bonds.
As early subprime homeowners slowly on standard mortgages, and banks have been racing to raise capital through loansmore money from each other or the Federal Reserve.
Everyone here has fault, each finger at each other, whose fault it is. Maybe it's the fault of the banks offering ARM loans, maybe it is customer fault is not a clear understanding ARM loans, or maybe it's the fault of the bond rating provides an excellent rating for loans that may be the standard.
Where do we go from here?
Corporate profits are already falling at the border for a fifth quarter. People are afraidwhat will happen to their money, some are already taking money out and keep it somewhere else to save.
Companies would have seen the slowdown to lay off workers, close businesses as credit market even worse. But even outside the financial market and housing, the economy is strong.
The weak dollar is boosting demand for our goods abroad, and we can expect a mild recession that ends next spring. Growth is expected to happen in 2009, as the Fed is pumping billions into the market and banking system.
OfOf course, that all banks will change if the credit market can stay scared and stop lending, or loans only for selected borrowers. If that happens, home values could be even more, crimping confidence and respond to Wall Street in a negative way.
Higher taxes?
Whoever wins the presidency you would have to pay higher taxes. At this stage it is difficult to say which is final statement of 700 billion U.S. dollars rescue plan. Some of an estimated 900 billion U.S. dollars, some go over one trillionDollars.
If the economy continues to move into a deeper recession, dragging the housing market with it, the cost to the taxpayer would have been easy even move even higher.
Savings
Your savings are protected, there is no doubt. Bank money market accounts and CDs are as different as well protected. Even if the banks can still walk, your funds are FDIC insured.
For investments such as 401K plans, ensure that your plan is diversified. Don, you do not want all the stock on 401Kthis time. Think also of stable value funds, as they yield of 2% -4%.
Deposits up to 250,000 dollars per person per institution and $ 500,000 for joint accounts will be protected by the FDIC.
Shares
If you 500 shares of Apple and your broker breaks its own, your investment is still there and will probably be transferred to another broker. If the state reaches a certain bank, you automatically lose all of your investment. See what happens is Washington Mutual. There were manySpeculators, when Washington Mutual started to gain shares were subsequently to only that one day Fed took the whole bank and all investments were gone.
Its shares, bonds and mutual funds will be covered, foreign exchange, precious metals and commodity futures contracts will not be.
Insurance
If your insurance company suddenly goes bankrupt, is the most likely. AIG, American Insurance Group, went bankrupt because the insurance company AIG bonds. But AIG received 85 billion U.S. dollars loanGuarantee from the federal government.
However, you have a patron. If you have an outstanding claim when your insurer does not receive a state guarantee funds to cover it. The rules vary, but generally pay fund up to 300,000 dollars in claims on most policy areas.
With variable annuities, you are protected, because you invest in a mutual fund, such as your name and insurance, which by law can not touch, if they go bankrupt.
For most other insurance policies you have in the Rule 30Day to find another insurer. If you have a large sum in advance, you can seek reimbursement from the state health insurance.
Real Estate
The new bailout plan even if only a few things. First government is trying to buy the bad mortgages, and if Wall Street does not respond well, saw Congress in Europe, especially in Britain, where public funds are injected directly to banks. This plan is currently being worked on with direct injection of funds, they should encourage banks to lend,again.
But that can not help real estate because home prices have to do with the scarcity of land. Homes for sale again slightly lower price tag and will be at home by 10% -20% next year. Key is still getting loans, so new buyers will come on the market, thereby increasing prices for homes.
Credit
You may have heard about the credit is frozen, tight credit, tough mortgage standards. You can still loan you have at least 660 score, low debt, and 10% belowPayment. But what if you do not.
The banks are no longer willing to lend people with bad credit. They are afraid you will not be to repay these loans back. With direct injection from the government should allow banks to make more loans, even if you have a few small bruises on your credit card.
Jobs
Are in this difficult financial time, more employers are setting off from the employees. Employers prefer to save money at the time, so that they can action be continued.
Be sure to save youprepared at this time. It is recommended that you should have at least three months a state of emergency savings. Sure, there are enough jobs available, but remember that many people are applying for the same job positions. Nowadays, perhaps even more than before, if a company is laying off people, you can be sure those employees begin to study for jobs right away.
When will the market will recover, as I know?
Pay attention to the London Interbank Offered Rate, or LIBOR. The lower it is, thegreater the likelihood that the banks are unwilling to lend freely. Historically, LIBOR is nearby, lie the Fed Funds rate at 2%. At present, LIBOR fluctuated between 3% - 6%, the banks still represents a big risk in the market.
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