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POSTED: Tuesday, September 30, 2008

After a $700 billion government bailout plan was rejected by the House yesterday, Wall Street experienced its biggest losses since 2001, causing Hawaii stocks to tumble and sending residents into a tailspin.

  Financial planners and institutions across the islands fielded more calls yesterday as clients sought information about where their portfolios stood and advice on shoring up their accounts and ensuring the safety of their holdings. They were reacting to the news that another big bank, Wachovia, had been rescued - this one, by Citigroup.

Meanwhile, the Dow Jones industrials fell 6.97 percent in closing down a record 778 points. The Standard & Poor's 500-stock index tumbled 8.77 percent and the Nasdaq composite index dropped more than 9 percent.

But 24 hours later it was a different picture on Wall Street as stocks today recouped more than half of the previous day's losses amid growing expectations that lawmakers will salvage the bailout plan. The Dow ended up 485.21 points, or 4.68 percent, while the S&P 500 gained 5.27 percent and the Nasdaq rose 4.97 percent.

Still, private investors are worried about the value of their portfolios, homeowners have become concerned about their property values, and even those without any significant holdings are worrying about the sanctity of their bank accounts. But some fear that the losses will not stop there.

Fallout from struggling financial institutions and the resulting credit crunch ultimately could impact everyone from Waianae's homeless beach dwellers to residents in the state's most affluent ZIP codes, consumers said. Short of standing by and watching their losses mount, what's a Hawaii resident to do?

“;It's like a house of cards. You have to let it fall and hope that it's not too bad,”; said Neil Rose, chief investment officer with Cadinha & Co.

Don't panic, Rose said. Think carefully before deciding to buy, sell or hold your investments, he said.

“;The goal is to get to an allocation that lets you sleep at night,”; he said.

Waiting it out is a good choice for most, said Richard Dole, chief executive of investment banker at Dole Capital LLC.

“;Obviously this week, we've had disappointing news,”; Dole said. “;But, there's no evidence that we are falling into the Great Depression again.”;

Savvy investors may find opportunities in current market conditions, Dole said.

“;That's how Chinn Ho made his money. He bought the Waianae Sugar Co. when it collapsed during World War II and Harry Weinberg made money during the Depression,”; he said. “;Right now, Warren Buffett is buying, not selling.”;

On the other hand, if they haven't done it yet, now is the time for Hawaii investors to get defensive about protecting assets and investments, Rose said.

“;Pare down your investment risk, diversify your portfolio and don't assume that your bank is invincible,”; he said.

Warren Luke, chairman, president and CEO of Hawaii National Bank, said that in general most of Hawaii's banking institutions are relatively safe.

“;We never got caught up in the mess,”; Luke said.

Most bank accounts are insured for up to $100,000 and most IRAs are insured for up to $250,000, said Barbara Kim Stanton, director of the Hawaii branch of the AARP, the voice for Americans ages 50-plus.

Still, it makes good sense for Hawaii consumers to visit http://www.fdic.gov/edie, or they can call (877) 275-3342 to find out where they stand, Stanton said.

Checking the stock price on publicly traded banks is also a good way to vet them, Rose said.

“;If it's gone down significantly, that could be an indicator,”; he said.

In addition to making sure that their investments are safe, retirees should put off tapping into their accounts as long as possible, Dole said.

For those nearing retirement, now is not the time to quit working, Stanton said.

“;We are telling older workers to work as long as they can,”; she said. “;Right before their eyes, they are seeing their retirement money erode.”;

Ed Brown of Waianae was set to retire this year or next; however, the current financial turmoil on Wall Street could keep him working, said his wife, R. Brown.

“;We saved for years, but our retirement isn't going as far as we had planned,”; she said.

 

  In addition to holding off on retirement, the couple has curbed other expenses to make ends meet, Brown said.

“;We used to eat out a lot because my husband traveled so much; now, we're not doing that,”; she said. “;The restaurants that we used to go to are hurting, too.”;

It's crucial that Congress passes an economic rescue plan, or the retirement savings of millions of Americans could be wiped away and the economy could falter more, said Bill Novelli, AARP's CEO.

“;Homeowners will likely see their home values plummet, and they can forget about moving or borrowing money to fix their current homes in order to stay there longer,”; Novelli said. “;Our kids and grandkids will likely lose access to student loans, perhaps costing them the chance to go to college and meet their full potential.”;

Hawaii's small businesses will suffer along with the state real estate market if a credit crunch ensues, said Stephany Sofos, a Honolulu-based real estate analyst and appraiser.

“;When there's no movement of money, businesses can't get things going and they'll be laying people off left and right,”; Sofos said.

Luke said that there's still money available in Hawaii.

“;We have plenty of credit available for our loyal customers who have good credit and have been good borrowers,”; Luke said.

But if the economy does not improve, Sofos questions how long that will last. Credit cards have begun cutting limits, and lenders have frozen home-equity lines of credit, she said.

“;Everyone will suffer if the cost to borrow rises,”; Sofos said.

“;In 1982, the interest rates hit 22 percent and it basically stopped everything.”;

Likewise, Brown said that she is bracing for further impacts if the financial crisis is allowed to snowball.

“;You don't have to have investments to feel this.”; she said. “;The social networks are being spread so thin. I don't think that we are far off from bread lines in Waianae.”; 

               

     

 

 

Financial advice for retirees         Some money tips from AARP:         Question: I'm not one to ride out the storm on Wall Street. Where can I park my money that's less risky?         Answer: The safest investments are money market funds, particularly those that invest in Treasury bills and certificates of deposits, says Jean Setzfand, AARP's director of financial security. But she also notes that the safest investments usually produce the lowest returns. Buying annuities - or charitable gift annuities from a charity or university, which come with tax breaks - may be an alternative for investors who are seeking to reduce their stock exposure and who want an income stream for life, says Jim Schlagheck, a wealth management specialist and author of Cash-Rich Retirement.         Q: Could Black Monday happen again?         A: Black Monday refers to Oct. 19, 1987, the day that the Dow Jones industrial average plummeted 22.6 percent, a 111-year record loss that still stands. Many experts say that a repeat of this magnitude is highly unlikely because the stock market operates very differently than it did 20 years ago, with changes from more stringent curbs on trading to greater investor participation and awareness. By comparison, the Dow sank nearly 7 percent yesterday despite the record point drop.         Q: I retired five years ago, but with the economy and inflation as they are, I need to go back to work. Where do I start?         A: You're not alone. Workers age 55 and older are becoming one of the fastest-growing demographics in the U.S. labor pool. Today, many Web sites now cater to older job seekers. Here are a few: RetirementJobs.com, SeniorJobBank.org, RetiredBrains.com and Jobs4point0.com.