How low can you go? The Dow Jones Industrials’ twelve-month peak was on October 11, 2007 closing at just over 14,015. Today, January 17, 2008 it closed at just past 12,159 down more than 1,856 points or 13.2%. Over 2.2% of that decline occurred today. It’s probably not yet at bottom as more banks, mortgage companies and other lenders fess up about the bad loans in their portfolios. What’s worse is that everybody is nervous. To paraphrase Donald Rumsfeld, “We don’t know, what we don’t know.” Write-off’s are occurring fast and furious, and now calls are being made for relief to jump start the economy.

Stimulus packages of $50 – $150 billion were bandied about today. Federal Reserve Chairman Bernanke opined these amounts seemed “reasonable… from a macroeconomic point of view.” Congress, with both parties and the President, are seemingly united on this subject and want to pass a stimulus plan asap.

I hope that more thought goes into these stimulus proposals. Perhaps those facing foreclosure should be given extra time, even up to six months to pay their delinquencies, or if unemployed, money is used to provide quick assistance for them to find a new job. A rebate check of $1,000 would sure help, but if they are out of work or three months behind on their mortgage, money of that amount doesn’t seem to me to be the end all answer. If I get the rebate, I’m not going to go out and spend it for goods and services. I’m going to pay off the goods and services liabilities I incurred over Christmas. My rebate likely won’t help jump start the economy in the short run and it’s my belief that a lot of people are thinking the same way I am.

My suggestion is to look at a combination of solutions to incorporate into the stimulus package. Throwing money around and then claiming your concern led you to action that is sure to work, doesn’t instill a lot of confidence in me. Tax cuts may provide long term relief but an interest rate cut will be more effective in the short run. If the Fed cuts rates by half a percentage point, the market will go down again. They’ll have to go 3/4 of a percent or even a full percentage point to get people excited. We’ll have to wait until the end of the month when they meet. In the meantime, everyone’s nerves will be on edge which doesn’t bode well for the market in the interim.

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