Begin building cash, now! That’s the word from Brent Arends of the WSJ online in his R.O.I. column for today (see $“Stash Your Cash,” WSJ online, 30 Sept. 2008). A market of chaos argues against further investment in the stocks at this time, he writes. Here’s a brief glimpse of what he says:
Drop your cable package and TiVo. Say goodbye to Applebee’s and Starbucks. Cancel the ski trip.
Slash every single penny you possibly can from your household budgets and start building up cash.
Yes, I’m serious. The shocking collapse of the rescue package on Capitol Hill threatens a disaster on Main Street. Unless this gets reversed almost immediately, it could turn a slowdown into a slump, and a slump into a depression.
Arends isn’t the only one making the argument for a Main Street collapse. CNBC, The NY Times, The WSJ, all deplore Congress’s refusal yesterday of the bailout package. Credit markets remain so tight that if not loosened up in the next few days, the situation will be dire for all of us within the next few weeks. There appears to be so little support among the populace as a whole or among Congressional rank and file, especially Republicans, for a bailout package that the risk to Main Street grows each day. Whether or not the House can come back on Thursday or Friday and deliver a package remains to be seen. Personally, I’m not hopeful. And we don’t know, of course, that credit markets will be loosened sufficiently to unclog capital arteries even if Congress delivers something similar to what they defeated on Monday. That’s the dire situation the world economy is now in.
Of course, if Arends’s advice is followed, then increased savings means less spending, which will further exacerbate a downturn. But his message, filled with hyperbole as it may be, is prudent. Begin building cash reserves, as much as you can.
Posted by soberingnews 
