Investing Sense for Lehman and Merrill

For many of us, the past weeks and months have shown us instability and uncertainty at level not seen before. Fannie May and Freddie Mac teetered on the brink of collapse before an inevitable government take over. The Countrywide collapse and the end of Bear Sterns.

The latest casualties of the big credit crunch / mortgage meltdown hit the news this week: Lehman Brothers (passed on by BoA) filed for chapter 11 bankruptcy and Bank of America bought out Merrill Lynch.

Not the Jet Set is hardly an epicenter for investing advice - and thats not what we are here to do. But what does all this mean to you and your investments? The Dave Ramsey Show was flooded with questions about this yesterday and here is some of what Dave had to say:

On Merrill Lynch:
Should I pull my money, close my account, move my 401k, .....? No. Not so long as you are happy with the service you are receiving. Very little is really changing here. Will BoA change ML? Who knows. Time will tell. As Dave put it, "let's say I have 6 rental houses and I have a management company managing them for me. If the management company goes under or gets bought out, then I don't lose my properties." You assets are not at risk.

Lehman Brothers:
My mother has money invested in Lehman Brothers bonds, will she get her money? Maybe. This is a bit more dire situation than Merrill. Bonds, considered a liability or debt, will be paid off before the shareholders. She may get some, likely not all.

He had lots more to say and all of it was excellent and level headed. Certainly not fear driven like some loonies are spouting. I haven't had time to pull the podcast, but I highly recommend it. the above quotes are from memory, so some of it may be paraphrased. Still, the gist is: don't freak out

One last bit for good measure:
Peter Schiff is telling people to sell all their US stocks and buy gold and foreign stocks, what do you think? No. Peter is a fruit loop. Do you think the foreign markets are any better? As a coworker noted today, the some of the foreign markets are off by 5%. BTW - Irwin Schiff, Peter's father, went to prison for refusing to pay his income taxes, something he claimed that the government could not enforce. Just to give you an idea of who we're talking about here.

Stay calm. This too shall pass.


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