Jan 22, 2008 9:36 pm US/Pacific
CBS13.com Answers Your Financial Questions
SACRAMENTO (CBS13) ―
CBS13.com hosted a web chat with David Schauer on Tuesday afternoon, where CBS13 viewers were able to ask their financial questions to an expert in the field.
David is a certified financial planner and chartered financial
analyst with Hanson McClain, Inc., and holds a Masters degree in
financial analysis.
David answered your questions live for more than two and a half hours. We have compiled some of the more common questions asked of him during that time.
Q: How does this downturn compare to other market downturns?A: To date, this current downturn is moderate. Typically the normal "bear" market is more than a 20% loss. Right now, these losses have sent down the S&P 500 16.5%, which is similar to the downturn in 1998. In that year, we did see a very robust comeback – in the next seven weeks, we were back up to the levels preceding the downturn.
So, right now, this is not a severe downturn by any means.
Q: My van broke, and we can't afford to put anymore money into it than it's worth. We don't have any "extra" money to buy a new van, but would it be a good idea to get into my husband's retirement money to buy a new van?A: Personally, I really don't like taking money from retirement plans to fund current expenses. However, if you need the money, I would prefer taking a loan. A loan is not taxable, while a distribution from a 410(k) is.
Q: Should we be worried about inflation with these rate cuts?A: With the current state of the housing market and the "wealth destruction" that we are seeing, it's more of a deflationary event. We have commodity prices moving up, but as the economy softens, we'll probably be seeing the prices backing off. My personal opinion is that inflation is not the bigger issue here, it's the slowing economy.
Q: Is now a good time to refinance our home?I would say that it's a fantastic time to refinance. If you're at a high rate -- especially an adjustable rate, and you don't have a prepayment penalty -- interest rates are coming down.
A lot of people think that the Federal Reserve reducing rates today is the key. It's really been the systematic trend of the Treasury coming down over the past weeks and months that's helping the mortgage industry and allowing people to refinance out of the strict and difficult mortgages that they may have.
Q: Should I transfer the stocks in my 401(k) into bonds and then continue to buy stocks with new contributions at the lower price?I would not make that transition at this time. If this is bothering you, I would wait for the market to come back up before allocating your resources into bonds. I do not like making that type of move in a week where stocks are down. Try to stick it out, reevaluate your market allocation after the market straightens out a bit.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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