Mr Paulson Offers Baby Boomers a Second Chance to Get Some of Their Nest Egg Back

We are all concerned about the banks and how secure they are. Mr Paulson said the banks are 99% secure but is going to extraordinary lengths to ensure they have access to tax payers money. He and the FED are manufacturing money to keep all the bankers employed, I mean keep the markets liquid and prevent a complete mortgage collapse.

With the new rules on short selling on selected stocks it appears the professional money is jumping back into the market and we are on target for a mini-rally or another bounce.

Either way it might be a good idea to take a serious look at your equity funds, ETF’s and stock holdings in your portfolio and make some decisions.

If you are a Baby Boomer in retirement Rule #1 is to avoid large losses. So if the rally holds there may be a chance to reduce the existing losses and either exit the market or put stop losses in place to limit any downside post this mini rally. You need to get involved and make some decisions here.

As I have said before the market doesn’t fall 10 storey’s and get up and walk away even with the FED pumping money into the banks. At best we can expect it to crawl away and take some time to recover quietly I think. So caution is the order of the day here and if the stock market gives you a second chance courtesy of Mr Paulson and the FED to get some of your nest egg back then I think you should take it.

Remember most of the funds have to be fully invested most of the time. So the first hint that there might be some profits to be made in the short run, and they are right into it buying up all the depressed stocks. No one knows if they are right but the probabilities are still there is more pain to come.

The funds are using the cash they managed to get out of the markets and the new money you have invested to bottom fish. If they can get in at the bottom the weight of money from their peers acting in the same way can carry them up to make some very good profits quickly. This from Matt Egan at FoxBusiness:

“We were seeing some real money coming into [financial’s]. Money managers and fund managers are afraid of missing the move,” said Steve Sachs, director of trading at Rydex Investments. “That’s obviously a bullish sign for the sector.”

Last man standing will take the brunt of the losses as the market is likely to retests the recent lows again soon. So as soon as they think the rally is over they are likely to exit the market just as quickly. That’s why you need your stop loss orders in place or instructions to your financial planner to get you out. There is no buy and hold going on here.

Regardless it is your money that is being used to find the bottom. So consider putting a floor under the losses you are prepared to take.

This is irrational exuberance gone mad. The Banks post further losses for example AMEX, Wachovia, and are bought. Apple posts a great result and mentions it may not be as good next time and is sold. What a “panicky” lot we have managing our money.

Analysts lower earnings expectations to the point where if a bank only loses 20% instead of 40% that is a buy signal. Figure that one out.

“Merrill Lynch on Thursday posted a bigger-than-expected loss on write-downs of $9.4 billion. Citigroup, which reports results today, is also to announce a sizable write-down.”

It may be that they over estimated earning in this market, but does a lower loss than expected make it a buy? Find out if your fund manager has his money in your fund. The only rational explanation is fear of missing out on a rally by the fund managers. Adam Shell from USA Today reports:

So be very cautious and trust no one. If you are in retirement and relying on your nest egg look upon this as an opportunity to reduce your exposure to equities or at least put a limit under your losses if the market continues to rally. If it continues to go up all well and good. If not at least you will have some control over your losses. That’s what counts right now – getting back some control.

One Response to “Mr Paulson Offers Baby Boomers a Second Chance to Get Some of Their Nest Egg Back”

  1. It is pretty scary to find your nest egg has gone down about 50,000. We are all trying to cut back where we can. All of us have set bills that cannot be changed. So most of us feel it is driving and eating. Unfortunately that does not make a huge difference.

    What else can we do? I think many people are in that situation today. We are trying to hold on to what we have….So any advice we get financially is helpful. So we really appreciate all the advice we get from you…carol stanley

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