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Yesterday, the stock market was looking somewhat pessimistic. The $700 billion bailout package was hung up in Congress as lawmakers questioned certain aspects — including the power that Treasury Secretary Henry Paulson was asking for.

However, after President Bush’s speech last night, things look a little different. He offered some key concessions that lawmakers wanted, and generally expressed his desire to do whatever it takes to save Wall Street. CNN Money reports on the effect that renewed confidence is having on the stock market:

But Thursday brought optimism that a modified form of the deal could see passage, following President Bush’s speech Wednesday night and comments from congressional lawmakers.

That optimism countered the session’s negatives, including GE (GE)’s warning, a seven-year high for jobless claims, weak durable goods orders, a report that showed new home sales fell to a 17-year low, and a falling dollar.

But how long will this last. Is it just so much “confidence”? How are the fundamentals? It is important to carefully guage these items, keeping a cool head during this crisis. Now is not the time to go with the trend of the moment. If you are a long term investor, now is the time to take a deep breath, and look for bargains — as well as review the fundamentals of your portfolio.

Today’s stock market rally could give way to more pessimism tomorrow. The story could change by this afternoon and the market could head further down. It is difficult to truly predict the market in the best of times, and during volatile times like this, it is all but impossible. So use your common sense and do what you can to limit your losses and prepare for the future.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

Tags: stock market, stock market news, investing blog, Bush speech,
economy, investments, financial crisis

As I perused the latest quarterly statement from my Roth IRA account, I had to fight feelings of statement shock. Sure, I knew what was coming (who wouldn’t know, after all the Wall Street drama lately), but that didn’t really prepare me to see the numbers staring me in the face.

Investopedia defines statement shock thus:

The shock associated with opening an investment statement and seeing that the value of your portfolio has dropped more than what was expected. Statement shock is most commonly referring to an unexpected drop in value but can also be used to describe lower than expected returns.

And really, that was my experience (the first part). I had vague expectations of what I would see, but I wasn’t truly prepared. But then my normally long-term outlook asserted itself, and I began thinking about the positives. After all, now is not the time to panic.

Some people have expressed worry, threatening to liquidate retirement accounts and considering all sorts of rash actions. While it is certainly time to cut your losses on some investments, there are those that actually represent a bargain. You can buy at a low prices — getting more for your money — and then when the market recovers, you will be sitting pretty.

The trick, of course, is to make good decisions. You need to choose solid investments that are likely to recover. Another trick is to keep the long term in mind. While statement shock can be initially disconcerting, it is important to take a deep breath and remember that over time the market gains. So, if you plan to retire in more than 10 or 15 years, you are probably going to be okay.

If you plan to retire sooner, it might be a good idea to consider other options before you begin withdrawals. Cash, working past your target retirement age, a reverse mortgage and other options can get you through until the market recovers and you can take retirement plan withdrawals without decimating your principal.

There is an old saying about the stock market: “Buy low, sell high.” And for many, now is the time for just that. Indeed, there are plenty of so-called “vulture investors” out there right now, waiting to pounce. Stock Market Funding reports on how things are playing out for these investors:

NY Times reports even before the ink dries on a proposed $700 billion bailout for the financial industry, Wall Street players have begun jockeying to be the first ones to snap up distressed investments on the cheap. As they try to make sense of how a government bailout would play, vulture investors are combing through balance sheets of possible targets that could run into trouble if banks start calling back loans to businesses and the economy worsens. …

They are preparing for a field day for deals, not only in the financial industry, but in the industrial, retail and other sectors where the flagging economy and tight credit will push more companies to the brink.

You don’t have to be a vulture investor to take advantage of the climate, though. Measured, thoughtful investments made now can yield good results down the road. Considering value stocks and companies with good fundamentals that are likely to recover is good bargain-hunting sense.

Others are considering funds that are meant to take advantage of pooled performance. Index funds are rather popular right now, since you can get more for less, and — over time — the market generally gains. But for such a strategy it is necessary to have a long term outlook. We’re talking an outlook of 10 to 20 years in order for such a strategy to work well.

Still others are hedging with commodities and using gold to try and prevent inflation from eating away all of their assets.

Are you employing any strategies to maximize your investments right now?

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

Tags: stock market, stock market news, investing blog, index funds,
economy, investments, vulture investors