Stock Market Information

As a young investor, I try to take advantage of the time I have before retirement. I work on a solid asset allocation, investing aggressively as I’m young but looking to tame my exposure to risk as I age. Many tend to point to the $1 million dollar mark as the point where they would be comfortable retiring. To reach that, there’s a certain age that you can max out your 401k contributions for one year, max out your IRA that year and just meet the annual market’s return of 10% (historically speaking) and you’ll get there by the time you retire at 65.

What age is that? Twenty six. If you take $20,500 now (if you’re 26 or younger) and let 41 years of compounding do it’s work, you’ll end up with $1 million at retirement time. Of course you have to take into account inflation, but that’s still a huge gain! You’d get your retirement out of the way and you’d be ready to focus on other financial goals like buying a house and discretionary spending. You’d be free to do what you want with your money knowing that in all likelyhood you’d be ready for retirement at the end of your career road.

Of course it’s important to note that most people at the age of twenty six have enough to worry about. Between student loans, rent, insurance and other expenses it’s unlikely they would hit $20,500 in savings in one single year, but the point is made. Time is the close ally of any young investor.

Wall Street managed to stage a fairly significant rally the day after it’s largest one day sell off in history. It’s entirely likely that the selling brought in buyers looking for stocks that were unfairly beaten down. Many financial stocks in particular like Bank of America and Apollo Investments both saw huge gains today, but the longetivity of this rally can easily be brought into question.

This is due to the fact that much of the buying was because investors are increasingly confident that a bailout is on the way. Despite the failure the first iteration of the bill to pass in Congress yesterday, many politicians have vowed to go back to the drawing board and pass what they see as a necessary measure to help stem the increased amount of bleeding out of the U.S economy. There’s been bitter talks on both sides of the political fence, but ultimately the general public doesn’t want to see a bailout. If pressure continues from voters, there may be a much smaller government intervention than was originally anticipated.

Traders on the floor argued that the government needs to take action, or there could be another serious decline in the markets. As one trader, Jason Weisberg, an NYSE trader for Seaport Securities noted: “If it doesn’t pass, then look out below, it could get ugly.”

Until there’s a resolution to the government plan one way or the other, many investors will remain cautious and stay on the sidelines. It’s expected that a vote of no could mean that there would be a slow bleed in the markets over a course of months, but there’s nothing to do for most consumers but wait and see, as the House isn’t slated to meet up again until Thursday.

Even after Congress continued to debate the details of a $700 billion dollar bailout of financial institutions across the country aimed at letting the government step in and purchase sour mortgage securities that are currently clogging up the system of credit that our government runs on. There are still plenty of questions as to how the bailout will work and who it will benefit, however.

Specifically, the bailout is unpopular amongst most voters. Why, they argue, should the government spend taxpayer money to bail out the financial sector that got itself into this mess? Shouldn’t they be allowed to fail? The answer is a little of column A, and a little of column B. Certainly the government nor taxpayers actually want to dump hundreds of billions of dollars into bailing out institutions in the financial services industry, but they may have no choice. As it stands the country’s growth has been fueled and built upon by credit and the ease of lending. Without that crucial credit line, many businesses won’t be able to get the money they need for expansion or to retain jobs. Worse still consumers won’t be able to get the mortgages they need to purchase a home or buy the car they need to get to work.

So that puts both the American public and the government between a rock and a hard place. Will they risk collapsing the dollar’s value which has already been battered by excess government spending and be forced to raise taxes to meet the country’s obligation in the future? Or will they allow these firms to fail, possibly triggering a series of events leading America into a deep economic depression with no end in sight? It’s hard to tell at this stage of the game, but we’re going to find out after today.