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Does the unfolding financial crisis reflect &ldquo;the reality of economic fundamentals,&rdquo; says Steven Pearlstein in <em>The Washington Post</em>, or &ldquo;irrational herd behavior?&rdquo;&nbsp;&ldq
 

 

The market’s mixed messages

Does the unfolding financial crisis reflect “the reality of economic fundamentals,” says Steven Pearlstein in The Washington Post, or “irrational herd behavior?” Are commodities spiking because of rising demand or speculative investing? And IndyMac, Fannie Mae, and Freddie Mac—are they “really insolvent or just victims of old-fashioned, rumor-driven bank runs”? The answer: It’s a bit of both. In commodities, speculation and large investments by funds are clearly “a significant factor” in the record prices; in financials, “investors have become overly pessimistic.” Market fundamentals will prevail, eventually. In the meantime, “the only thing more dangerous than assuming the best is for everyone to assume the worst.”

Know when to spend it

“Nine times out of 10 cutting costs makes sense,” says Marshall Loeb in MarketWatch, but there are times when cutting back “can do more harm than good.” Don’t ignore car maintenance, for example—“it will only come back to bite you.” That means pay attention to leaks, odd sounds, and regular tune-ups. Also, pony up for smoke and carbon monoxide detectors for each area of your home. Faster broadband Internet connections will usually save you enough time to be worth the extra money. And buy a comfortable mattress. If you shop around, you can spend less than $1,000. If you're tempted buy a cheaper model, “remember you’re going to be sleeping on it every night.”

 

 

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