Friday, October 31, 2008

Is It Time To Move Beyond the Financial Turmoil?

Looking for value!
In my real estate license classes, each and every instructor got on his or her soap box and spewed their opinion on the current financial mess. Since they are associated with the real estate industry they felt more knowledgeable about the subject or just had a captive audience and wanted to vent – suffice is to say they blamed everyone for this mess. The ignorant, the greedy, the incompetent, the incumbent, the retired, the foreigner … even Joe the Plumber came up in this rant.

Everyone had an opinion and that is no surprise. We all are eager to judge and pin blame on somebody. I guess it makes us feel better if we can identify the villain. In times of crisis – you need a head to calm the crowds down.

Sooner than later the witch hunt will begin for the culprits. We will feel closure as the guilt are tried and prosecuted for ripping off the naïve and ignorant. Remember Enron and WorldCom! Knowing that the guilt are behind bars makes the pain of losing most of your money more bearable.

But here is my question. Did we not participate in this sham? Yes – you and me. We bought real estate, we refinanced, we spend the home-equity, we upgraded to bigger houses, we marveled at our ballooning stock portfolios, we speculated on the commodities boom, we bought emerging markets, ventured into frontier markets and gloated at our financial smarts.

Bubbles are formed by collusion. And main street was an active participant in this bubble. We can debate the amount of blame to dish out to the various parties but in the end none of us is going to come out blameless.

Ranting about the mess may help you let off some steam but what puts you ahead in this game is forward thinking. Learn from what has happened but start to move forward. Consider the following advice from John Bogle

“From today's levels, it's reasonable to think that the S&P 500's profits could grow by 7% a year. Throw in the current dividend
yield of over 3%, and I believes stocks could return 10% a year for the next

Read the rest of what Mr. Bogle and others have to say here!

(Photo courtesy - Flickr/honjooshi58)

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