Relax, don't panic yet.
If we are to believe the media the financial markets are in meltdown and gloom and doom are right around the corner. The collapse of Lehman Brothers (and Bear, Stearns before them), the financial difficulties being encountered by AIG, and the government bailout of Fannie Mae and Freddie Mac are being seen as the harbingers of a recession. The stock market fell 500 points yesterday, and it's down another hundred or so this morning.

And still, things aren't as bad as they were in October of 1987 when stocks dropped 25% in one day. We recovered from that crash, and we'll recover from this glitch too. Many people are mocking John McCain for insisting that our economy is still fundamentally sound. But, he may very well be right. New York City Mayor Michael Bloomberg thinks so, and he's hardly a starry-eyed naif when it comes to high finance. In fact, Mayor Bloomberg gives us some very compelling reasons to remain optimistic:

Most of us don't own stock in Lehman Brothers, or Fannie and Freddie, or in any other Wall Street titans. They made some bad investments, and they will now pay the price for those poor decisions. If you do own their stock, sell it; they've hit rock bottom and they're not going to recover anytime soon (if at all). But other investment sectors seem ripe for bargain hunters. Oil is down to $92 per barrel and the dollar is gaining against the Euro and the Yen. The market may fall some more, or it may recover. Predicting the future is hard; planning for the future is prudent.

To that end take a deep breath and then check out these ten ways to protect your finances courtesy of the Wall Street Journal. Pay extra special attention to item #10:

The politicians need to resist the urge to "do something". Government meddling got us into this mess in the first place. The last thing we need is another massive taxpayer-financed bailout. It would be an insult to all of us (the vast majority of Americans) who pay our mortgages on time, didn't take on mountains of real-estate bubble debt, and generally live within our means.

But, we're going to get socked for some of the cost. It's inevitable in an election year; neither party wants to appear uncompassionate so bipartisan bailout legislation is probably in the works. It's a mistake though. If we let the markets reorganize themselves according to fundamental financial principles we might just end up with a stronger, more resilient economy.

Posted at 12:15 by Chris   []   | | | Email | del.icio.us | Digg | Stumble It! | Reddit | Link