People need to start paying serious attention to their investments. There are fundamental things wrong with the financial health of many firms and it all feeds back to the leverage and risk. In some cases some of these firms used 30:1 leverage in packaging up risky mortgages. The average investor needs to pay attention to this as we may not be near the bottom of the bear market. Investors can learn strategies to protect themselves and their future as well as make money while the market is on its way down.
What about your ability to get a loan?
The ability of consumers and businesses to get credit has been greatly limited. Banks are now snapping back from risky lending practices to super conservative lending practices. This turmoil will affect your ability to get a home loan, refinance, or get a small business loan or line of credit.
How safe is your bank account?
Most savings and checking accounts are insured by the FDIC up to $100,000. This means that you might want to spread out your money if you have more on deposit at one institution. The federal government is prepared to step in but they have shown their limits by letting Lehman fail.
Is there a silver lining? (Stock market is down so is this the best time to buy cheap stock?)
It is imperative that investors seek education. There are fantastic opportunities to buy companies that have been painted by the same brush as some of the riskiest banks and insurance companies. It is not only important to find these companies, but more importantly to know when to sell. The educated investor can make money on the down side and protect their long-term holdings with the right education. Some people think education is expensive, but ignorance can cost far more.
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