Friday, May 29, 2009

Moving Money Around

I'm not a money expert, but if you've moved money out of the stock market because of large short term losses and you have placed it into CDs or savings accounts to prevent it from further hemorrhaging, you may not be doing yourself any favors. Why? Because inflation and low interest rates will steal its value.

At this time (Spring 2009), the annual inflation rate is pretty close to zero, (as are bank interest rates) but the inflation rate won't be naught for long. As the economy warms back up, inflation numbers will start to rise again and it's a good bet that the way the Federal Reserve is printing money (diluting the dollar's value) that inflation will shoot up into the double digits as it did during Jimmy Carter's tenure as president. Rising oil prices alone, because of oil's thorough union with all aspects of the economy, could cause inflation to rear its ugly head sooner rather than later. And just about anything these days could cause oil prices to rise, as it seems there is a potential trigger a day lately.

Convert the investment dollars into gold or other tangible goods, or buy back into the stock market while it is on the way back up. Stay away from Chrysler and GM stocks though. Yikes. Talk to an investment advisor before taking any action with a significant amount of money.

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