Monday, October 6, 2008

Reasons to Remain Calm

Reasons to Remain Calm

“You know you make me want to shout”

-Otis Day and the Knights

I am starting to feel like Kevin Bacon's character in the movie Animal House. In the last scene of the movie, Bacon keeps yelling, “remain calm.”

Instead, the crowd tramples him into the ground.

I was opposed to the Wall Street bailout plan, but it happened anyway.

I've been telling people to spend less than they make, diversify their investments, and to avoid risk. Some took my advice, others didn’t.

If Wall Street had followed the rules, the crisis would not have happened

Many bailout supporters were expecting an immediate cure. Even if it works, the bailout will take a long period of time. Someone should have explained that to the American people.

No one did. When the worldwide crisis continued, people were spooked.

It is time to remain calm.

Go back to my simple rules. If you are spending less than you make, diversified your investments and avoided risk, you are going to be ok.

Don’t get caught up in the panic.

I know you want to do something. We all do. We have this feeling of total helplessness, like watching a loved one die of cancer. The game is being played on a larger stage.

Remaining calm is the only true solution.

I’ve watched the President and Secretary of the Treasury panic last week. That didn’t make me feel good but I stayed calm anyway.

This is a time when we need to rise above our leadership. The quicker we all settle down, the quicker we can start working towards solutions.

The worst decisions are those made hastily and under stress. Financial decisions have to be separated from emotional reactions.

If you have money in a 401(k) plan, it's probably gone down in the last month. It may go down in the next month. It may go up.

If I knew the exact answer, I would be a multi billionaire. Not having all my eggs in one basket gives me a chance to be right either way.

Some segments of the market do extremely well in times of panic. Others do worse. The key is to have your money in everything.

I didn’t think the $700 billion would help everyone. Some segments of the economy have been hammered, some not at all.

If you work in healthcare, government, or a business not dependent on the financial markets, you may in good shape. The odds of the losing your job is possible, but remote.

No matter how bad the economy gets, we are still going to be hiring nurses, firefighters and dentists.

If you're retired and get a fixed, defined-benefit pension check, your money should be safe.

If your own your house completely, and not planning on selling it right away, you don’t have a problem.. If you have a fixed mortgage, and you're making payments on time, you shouldn't have a problem either.

There is another extreme of the economy . People who are maxed out on their credit cards, and behind on their sub prime mortgages. The economic crisis, may not hurt them as badly as the status quo.

Those people were already in trouble. There is now going to be huge political pressure to make banks and mortgage companies work out compromises.

There are a number of sectors really hurting. I happen to be affiliated with two industries, financial services and media, having a difficult time.

When it's all over, those fields are going to have a couple big players and a lot of tiny ones. The mid level companies won’t survive.

The crisis is a good time to gauge if you're going to be one of the survivors. If not, its time to look at alternatives.

Changing careers is a life changing event. Its not a decision that you should make during times of panic.

This is the fourth time in my professional life where I’ve seen an economic boom and bust.

I saw it happen in the stock market crash of 1987. I saw it happen when technology stocks crashed in 1999. Worst was when “the world stopping turning” on September 11, 2001. Along with the human loss, it damaged the economy. Some industries, like airlines, have never come back.

Each time, I watched people buy high and sell low. They would get caught up making irrational economic decisions and then sell in the middle of a panic.

I would see people make bad, life altering decisions because they didn’t think them through carefully.

Kevin Bacon may have gotten trampled, but he had the right idea. Right now is the time when people should be heeding the advice to stay calm.

Don McNay is the Chairman of the Board for McNay Settlement Group in Richmond, Kentucky. You can write to him at or read his award winning column at

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