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article imageWhat you need to know about the U.S. market crisis

By Barbara Sowell     Sep 16, 2008 in Politics
A constant stream of articles addressing yesterday’s stock market crisis offer little practical advice for the average person. Local newspapers, however, are doing a much better job of informing the public.
An article in The Wichita Eagle this morning is actually filled with practical advice for the average American who wants to protect their savings. The article answers several questions such as “is my money safe,” and “should I be considering changes in my 401(k)?”
The article does offer one reason to be happy.
Is there any good news for consumers?
A. Yes. One immediate consequence of Monday's Wall Street earthquake is that oil prices sank sharply as investors fled anything considered a risky bet. The price for contracts of next-month's deliveries of oil fell almost $6 a barrel. If prices stay lower than $100 a barrel, inflation pressures should ease substantially. That means gasoline prices should drop in the weeks ahead. . . .
The last question is, "when will the crisis end?" According to Treasury Secretary Henry Paulson, “the crisis started with the housing market and would end when housing's problems ended.”
An article in the South Bend Tribune by Heidi Prescott, explains why investors should sit tight and do nothing for a while - perhaps a long while. It might take some time – maybe a year or two.
"People are foolish to think this is going to end in a minute or two. There will be no flick of a switch to have more money in your pocket," said Christopher J. Murphy III, chairman, president and chief executive of 1st Source Corp. in South Bend.
A second article by Prescott offers three tips to consumers, (1) don’t over react, (2) check your bank ratings, and (3) renew your commitment to the basics. That means to follow the sound advice your parents and grandparents gave you about money.
The consumer should know the bank they are dealing with, they should check their bank's rating on Bankrate.com, they should assure themselves that the bank is well capitalized. If the bank you are dealing with is paying high rates on deposits, you have to ask why... has the "smart" money left them because they are having troubles?
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