There is no way to get a realistic view of the financial situation today, currently the markets are acting they way they should, and it does not help that our national and local media is sending out a message of fear to there viewers and listeners.
Things are bad, but they could be worse. And for anyone with money to invest, it's a great time to make some quick money. Bank stocks have taken a nose dive - but those same stocks that tank one day, will have a wild swing up the next. To prove my point, just take Freddie Mac...
From it's peak [about a year ago] the stock was worth about $63/Share, on the day of the big crash, it was $0.88/Share [what some people would consider worthless. But, let's say, you were smart enough to buy Freddie Mac in August 2000, when the housing boom was on it's way - you would have purchased the stock for approximately $44/share. Then, let's say you decided to sell your position during the "day the music died" and got out early enough to make a profit -- say $10/share [btw, that day would have been around October 19th, 2007]. Now let's make this real interesting and put some numbers behind it...
You purchased 100 shares @ $44 = $4,400
You sold those 100 shares @ $54 = $5,400 [making a mere $1,000 in the process]
But what did you actually reap? Freddie Mac was a very generous company, throwing huge dividends to their shareholders. So how much did you make there?
1/2 Year in 2000 = 100 shares x $0.34 = $34
2001 = 100 shares x $.80 = $80
2002 = 100 shares x $.88 = $88
2003 = 100 shares x $1.04 = $104
2004 = 100 shares x $1.20 = $120
2005 = 100 shares x $1.52 = $1.52
2006 = 100 shares x $1.44 = $144
2007 = 100 shares x $1.00 = $100
2008 = your out = $0
Total in dividend payments = $822
So, you make $1000 on the sale of the stock and $822 while holding the stock -- not bad. That a total return on your investment of approximately 40% over 7 years - and an annual return of about 6% [very simple and not necessarily accurate calculation].
Now, let's say you were awaiting the meld down and decided you would take a big chance and risk the original $4400 on buying in at right after - you would have been able to purchase at about $0.50 per share - and give you about 8,800 shares right now. And if you had done that - you would now have $16,632 [as of today's closing price of $1.89] and within the last few days, you would have realized a gain of 278%.
I feel bad for those people that bought at $44 and still have their money in the stock -- that's bad and is devastating. But if you played the market, instead of the market playing you - right now you'd be asking "why do I need credit?".
Billionaire investor Warren Buffett is buying US stocks, he wrote in an opinion column in the New York Times. "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful."
