Summary: Last week, I held a special call-in show to focus on the new world we find ourselves in, from changes in the economy to challenges in the stock market. So, I thought I would give a recap of my discussion in case you didn’t have a chance to dial-in.<br> I began the call painting by the picture of where we are today regarding the economy and the markets.<br> I don’t think it requires much detail to give everyone a sense of what the economy is doing right now. You don’t have to be an economist to see the loss of business, loss of wages, and the insanely volatile market we have seen over the last 30 days.<br> Though things have settled down a bit, the kind of volatility has taken the breath away from even the most seasoned investors.<br> I focused more on the market because so many Americans have a stake in the stock market—either through your 401k or your IRA or even your pension plans (which also invest in the stock market although you really don’t see it).<br> In my opinion, the markets have reacted appropriately in many ways. The object of the market is to give investors a place to buy and sell their investments. I know this sounds too simple, but when you boil it all down, it is that simple. It is not so much a stock market as it is a market for stocks, like a market for corn or wheat, a place to sell and buy at a given price.<br> What is the price? It is a number agreed to between buyer and seller. If both have confidence in the future, the price will reflect that; if neither has confidence in the future, the price will affect that also.<br> Thirty days ago, there was no confidence in the future. Period.<br> But something else happens in periods like this. If there are only sellers and no buyers, markets could freeze up. It’s this freeze that is most dangerous and puts the economy in its most precarious position. It is the precursor of a serious economic decline and can cause a depression.<br> If the market operated in a vacuum, a freeze could be devastating. But fortunately, the market does not operate in a vacuum and there is something that can be done. It is called Government Intervention or Stimulus. Since the government has the ability to print money, it has the greatest financial power in the country—it can pretty much do anything it wants.<br> And do something it did.<br> It announced that the U.S. Central Bank will buy unlimited amounts of Treasury bonds and mortgage bonds to help ensure that the markets function properly.<br> It also set up programs to ensure corporations and state and local municipalities could have access to credit<br> Did this quiet the market and prevent a freeze-up? Yes! The market reacted positively, signs of stress in the corporate debt sector eased, bond funds rallied.<br> But Wait, That’s Not All<br> Congress can also do something. And do something it did.<br> Congress approved a historic, <a href="https://www.cnn.com/2020/03/25/politics/stimulus-package-details-coronavirus/index.html">$2 trillion stimulus package</a> that produced one of the most <a href="https://www.cnn.com/2020/03/25/politics/coronavirus-stimulus-bill-state-of-play/index.html"> far-reaching measures</a> Congress has ever considered—all with unanimous bipartisan support.<br> So with this backdrop, here is a rundown of my discussion on the call’s talking points. My first point I posed was:<br> What Should One Do If The Market Keeps Going Down And Stays Down?<br> Well, what does down really mean? The Dow Jones Ind. Avg. high for this year was 28,538. One year ago, it sat at 26,000 and as of last Friday, it stood at 24,000.<br> The last time the Dow approached 24,000 was on December 24th, 2018. I remember it not so fondly as one of the worst Christmas gifts ever!<br> So, if the market stays at this level for a while, what does that mean to you? No appreciation for a few years. I used to call a market like that a “RoomsToGo” market, back when Rooms To Go used to offer 0% financing...
