On Oct. 9, 2007, the Dow Jones industrial
average closed at 14,164 points, its all-time high.
At that time, many pundits said we were experiencing
a "Goldilocks economy," not too hot, not too cold.
|At a glance
In the fairy tale, Goldilocks was in
danger of confronting three bears, but in the financial
world, an impending bear market was just around the
bend. As we've since learned, it turned out to be
a brutal grizzly.
So what can we expect going forward?
Are our only best options to maintain a cash and fetal
position for the foreseeable future, or is this downturn
that proverbial "once in a lifetime" buying opportunity
for savvy but steel-willed long-term investors?
To gain some insights into what we're
in for and what it all means, Bankrate spoke with
award-winning financial journalist and "Cramer-antidote,"
Consuelo Mack, host of the acclaimed PBS television
program "Consuelo Mack WealthTrack."
Many people don't understand why the stock market experienced this recent crash. How did we get here, and what or who is to blame?
Yale behavioral economist Robert Shiller put it best on "WealthTrack": "You can't blame it on any one person or regulator. What we had was a social epidemic ... simultaneous bubbles in a number of different markets."
We've been through this era of being
an over-leveraged, credit-based economy, and this
de-leveraging process that we're going through means
that we're probably going to go back to growth rates
we had seen more than 10 years ago. That easy credit
we enjoyed did a lot of good things, but it also led
to so many bad things -- such as the bad mortgage
loans we're now hearing so much about, the lax borrowing
standards and all of these people who were being paid
fees to make these mortgages and other loans. And
then there was that perception that there really was
no risk to all of this.
There were people like Robert Shiller
and (money manager) Jeremy Grantham who saw this problem
coming, but nobody wanted to listen to such doomsayers
when everything in the economy seemed to be going