Local market-watchers still advising caution

Published 5:00 am Tuesday, October 14, 2008

Despite a Wall Street rebound Monday, local economy watchers arestill advising investors to be cautious amid uncertain economictimes.

Pathway Planning Investment Adviser Representative Carl Aycocksaid while the jumps look promising on the surface, it’s a goodidea for investors to watch the market for a little while to makesure the jump is not a fluke.

“I don’t think you should base any decision that important basedon one day, because obviously one day does not make a trend,” hesaid. “It is important that what we call ‘a bottom’ be reached, andwe’re closer to that than we were two months ago.”

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After falling for eight straight weeks, the Dow gained 936.42points Monday, its biggest one-day rally since 1933, and broke theprevious record for a one-day gain of 499 points, which occurredduring the technology boom in 2000.

Meanwhile the S&P 500 index advanced 104.13, or 11.58percent, its biggest point gain ever, and the biggest percentagegain for the index since March 15, 1933, when it surged 16.6percent. The Nasdaq rose 194.74, or 11.81 percent, second only tothe 14.2 percent record for a one-day point gain logged Jan. 3,2001.

Aycock said there are important things to consider wheninvesting money, and financial advisers realize the seesaw effectof trying times on Wall Street can affect the way local investorsreact to the market. Some opt to put their money in CDs instead ofthe market when they see too much fluctuation.

“Historically it’s best to be in the market, even though itplays with your emotions,” Aycock said. “The prudent investor triesto leave the emotion out of it, but we as financial adviserscertainly have to be sensitive to client risks and feelings.Ultimately we should work to meet the needs of the investor.”

Self-employed investor Danny Dunaway said he is glad to have hiseconomic knowledge, but that it’s also important to look for wisdomin investments.

“It’s a transition period coming up, and I think we just have towait and see if things shake out a little,” he said. “It may takemonths, and you can’t be in a hurry with your investments. If youjust pray and ask for wisdom, God will lead you in the rightdirection.”

Dunaway said he believes the economy swings are undoubtedly apart of God’s plan, which is another reason prayer should be animportant part of any decisions an investor makes with hismoney.

“I think what’s going on with our government has some spiritualunderpinnings,” he said. “Hebrews said God is going to shakeeverything that can be shaken so only the things that can’t beshaken will remain.”

Aycock said long-term payoff of the market eventually kicks infor those who are unshaken in times of fluctuation.

“A lot of people second-guess, and it’s hard to know when themarket’s going to go down or go up,” he said. “The consistentlong-term effect is that you should, in general, stay in the marketto achieve better results.”

Aycock said new investors should put money into the market on aregular basis, relying on dollar-cost averaging to return on theirinvestments.

“My advice would be to take what you can tolerate and buy intothe market on a consistent monthly or semi-monthly basis,” he said.”That way you buy in low times and in between times, and it’s bestto continue to invest consistently throughout your life.”

Copiah-Lincoln Community College Business Department ChairmanMike MacIntyre said he believes the economy’s issues are caused notby anyone at the top so much as everyday consumers.

“The thing that really has disturbed me over the years is thatthe politicians blame the fat cats on Wall Street, and the newsputs the blame on the politicians, but nobody points the finger atthe people who are actually responsible,” he said. “I’m thinkingI’m the problem, you’re the problem – it’s the Main Street guys thepoliticians won’t point the fingers at.”

MacIntyre said in the 38 years he has taught principles ofeconomics, he has noticed that people in the United States on thewhole have never been taught to put money away.

“We’ve been taught not to save in this country, because we wantthings right now,” he said. “We’ve spent all our current earningsand then borrowed money, and you can’t continue to do that. Ifthere are people who want to loan you that money to get thingsright now, they’ll take advantage of it, and unfortunately ourgovernment does that and lives beyond their means, as well.”

Dunaway agreed that the problem is poor investment from thesmallest investor all the way to the top.

“You reap what you sow and if you don’t sow well, whether it’speople in their own private investment decisions or mortgagedecisions, or if it’s the city, the state, or the country, if youdon’t use wisdom in those decisions, they’ll come back to hauntyou,” he said. “I continue to pray for our leaders for thissituation, and if we, wherever we are, exercise wisdom in our ownfinancial steps and life, we’ll be fine because God will honor Hisword.”

As to the cause of the market drops, Aycock agreed that poorinvestment strategies were the problem, starting as much as adecade ago. He said pressure from Congress in the mid 90s led to aculture of subprime loans, which caused a domino effect when thecost of homes went down.

“When you get away from the basics, pretty soon it comes back tobite you,” he said. “It may have taken several years, but itdid.”

MacIntyre said the country needs to work its way out of the bindit’s gotten itself in slowly, because a sudden rush to put money insavings could devastate the economy as well.

“Having said that … if we drastically change our savingshabits all of a sudden, that would be a depression overnight,” hesaid. “To spend a lot less right now would send the economy into atailspin.”