Financial freefall: Advisers consider what’s next

By: Dave Schwab

Local financial advisers agree on two points on the growing global credit crisis: It’s serious and something we’re likely to be dealing with for some time to come.

“I’m concerned people don’t realize the severity of what is going on,” said Cory T. Schmelzer, a Carmel Valley resident, La Jolla property owner, financial adviser and former Bird Rock Community Council president “Things are worse than we’ve seen probably in a generation.”

International leaders conferring, presidential candidates jockeying and government officials wheeling and dealing have put the stock market on a roller coaster, which included last week’s 2,400 point drop followed by Monday’s record one-day rise of more than 936 points.

In addition to those voicing thoughts about what it all means, financial advisers are opining about what investors and homeowners ought to be doing.

Financial-consultant-turned-author Rick Caras of Carmel Valley echoed Schmelzer’s thoughts on the direness of the situation, saying, “There’s a panic, a volatility factor that’s absolutely enormous. I don’t think there’s any question we’re in a global slowdown.”

Jim Guillou, senior vice president with Wedbush Morgan Securities Inc., which has a Solana Beach office said, “We’re in a crisis mode and it’s going to be with us for awhile. The government bailout is a troubled asset rescue program.”

History repeats?

Some pundits are beginning to see the specter of the’29 stock market crash and the Great Depression in current financial events.

But Carmel Valley resident John Schooler, a financial planner with WFP Securities and Western Financial Advisors, said there are numerous reasons why the possibility of a repeat occurrence is extremely slight.

“We have tools that we didn’t have at that time, and a federal government that is willing to use them,” he said.

Those tools noted Schooler, are adding money to the money supply and getting financial parties to lend.

Banks have plenty of cash to lend, just not a lot of willingness to lend right now because their tolerance for risk has gone down, he explained.

‘Streamline the system’

Author Caras said he believes revamping and streamlining our antiquated financial system may be one good that comes out of the current financial crisis.

“We need to create a single agency,” he said, “get rid of the alphabet soup of federal and state agencies that have been trying to govern a sophisticated, complex financial situation, and have been unable to do so.”

Despite the precariousness of the present financial situation, Schooler is nonetheless “bullish” on the long-term prognosis for the U.S. economy making a complete recovery from its current economic doldrums.

After the ‘bear’

“Ours is a powerful and strong country that will work itself through this,” he said. “We might be positioned to have a fantastic bull market after we get through this bear market.”

Bob Dermody of the Dermody Financial Group in La Jolla, a retirement specialists, had some thoughts for those who still have time to regroup before retirement.

While downturns cannot be predicted, he said, they can be anticipated. While those who have stopped working already have “irreplaceable assets placed in jeopardy,” he suggest those within three to five years of retirement should have rainy day funds.

“That way, when we run into a recession or bear market, we are prepared,” he added.