With so much negative press bombarding us daily, the following summary helps (I hope), make sense and better understand just exactly what is really going on in our current economic climate:

How we got here...
1. Early in this decade, interest rates were much lower than usual. Low-cost money perpetuated a quick rise in the value of homes across the country.
2. Mortgage lenders made it easier and easier to borrow money - even to people who should not have qualified, thus coining the term “subprime”– further driving up the value of homes. Unfortunately, many unscrupulous mortgage brokers sold their customers on adjustable rate mortgages and other hybrid loan types.
3. These insurance-backed subprime loans made it onto various balance sheets and later proved to be non-performing, many being 1st payment defaults.
4. Interest rates were raised in 2003 causing adjustable-rate mortgages to increase drastically. (Many consumers were struggling just to make their previous mortgage loan payment!)
5. Faced with the inability to pay their mortgages, multitudes began to sell their homes, many others defaulted. Unfortunately, this timed with the sudden halt of rising home values. As selling and defaults increased, house prices plummeted.
6. Lenders stopped refinancing; the default rate skyrocketed.
7. Investment banks holding the noxious subprime loans (AKA: “Toxic Assets”) began to “write down” the value on their corporate balance sheets causing investors to sell off their shares in financial institutions.
8. As the losses and bankruptcies mounted, banks became reluctant to lend money.
9. At the same time, oil prices were rising.

Current situation...
1. A bold government rescue plan is being enacted to take the bad assets off the books of investment banks and financial institutions. In addition to a global rate cut, the goal is to bring stability back to the markets. When this happens, banks will resume lending.
2. Oil prices have decreased.
3. Interest rates are low.
4. While declines in home values continue, it is slowing and could soon reverse (Tulsa has been somewhat spared in relation to other areas such as Phoenix, AZ, Miami, FL. and Las Vegas, NV).

Going forward (An optimistic “Aggies” opinion)...
As unsettling as they are, bear markets, even volatile ones like we are experiencing now, are a normal part of the market’s cycles. History proves that those who stay the course during difficult times will be rewarded. While past performance does not guarantee future results, one hundred percent of 10-year stock market periods have made money even though each 10-year period saw some years of highs and lows. The markets will come back. It’s just a matter of time. In the meantime, there are a few things you can do:
• Ensure that you are dollar-cost averaging. If you are contributing to a 401(k) plan, you are already doing this.
• Ensure that you are diversified.
• Cut spending and save at TMFCU!
• Don’t watch the stock market on a daily basis (I know it’s hard!).

*Dollar cost averaging involves continuous investment in securities regardless of fluctuating prices. The investor should consider his or her financial ability to continue purchases through periods of low price levels. Dollar cost averaging does not ensure a profit.