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Seriously, stop panicking about Wall Street

Angry man on phone

Tess Vigeland: Oh Lordy holy moly here we go AGAIN.

Montage of news stories: Good evening, you might be strapped in and hang on tight. The worst day on Wall Street in more than two years. Three days in a row, the Dow Jones Industrial Average has moved. Triple digits down more than 500 points. Markets saw a big leave yesterday. Yesterday, we're happy; today, they're unhappy. It's a bipolar market! It's manic depressive! What the hell is going on?

Yes what the hell is going on?! I'll tell you what's going on. All those crazy traders did not listen to my friend and our New York bureau chief Heidi Moore on last week's show. The one where we talked about the S&P downgrade and noted that this was not a time to panic.

So let's try it again, shall we? Hi Heidi!

Heidi Moore: Hi Tess.

Vigeland: So it's been a whole week since the last time we talked to you. Anything happen?

Moore: Yeah. That is ancient history. Can you remember a week ago?

Vigeland: I know!

Moore: How innocent we all were then.

Vigeland: Seriously, but you know, you and I talked about the fact that we didn't know what was going to come on Monday when the markets opened. That either investors were either going to say, "You know what, we knew a downgrade was coming or things were gonna fall apart." Well, they fell apart on Monday. And then things recovered on Tuesday, and then I mean, from there on it was just a crazy wild ride. Should we have expected that you think?

Moore: You know, I think reasonably, yes. The markets are always a pretty good fireworks show and this week, they have been in rare form. They don't necessarily reflect what they should reflect, right? So the markets reflect what people who are buying and selling things think. It doesn't mean that that is what is going on in our economy, as you and I have talked about before.

Vigeland: Right, there's a real disconnect between Wall Street and the economy, writ large.

Moore: Yes, exactly. At least in terms of markets. Because if you look at other markets, like the bond markets, they were just fine, they were supporting Treasury bonds and they still are.

Vigeland: Downgrade? What downgrade?

Moore: Exactly. Mortgage rates are at almost record lows. You know, there are a lot of things that were just completely unaffected by this, but of course, we all look at a few indices and we think, "Oh my God, the world is ending." But it rarely is, which is why panicking never helps.

Vigeland: And you know Heidi, I heard this week that August is a particular time to not be paying attention to what's going on on Wall Street, because so many people are gone. Where does that factor in?

Moore: Yeah, that anyone with any good sense would be on the beach right now, right? Obviously, ourselves excluded. But I think that there is something to that. When you don't have a lot of participation in the market, you can see things that aren't really there. Because it's fewer people influencing a lot more stocks, right? So it's the same way that if you go into a dinner party and it's two or three people, one person can really dominate the room. But if it's a big dinner party, then there is more chances of different kinds of conversations going on, and you get a better sense of what's going on in the world. And the markets are kinda like that.

Vigeland: Bigger dinner parties are always more fun.

Moore: Yeah. And more delicious, usually than trading stocks.

Vigeland: Exactly. Well, so what we said on last week's show -- and frankly, the week before that and the week before that -- was don't freak out folks. Is that still holding?

Moore: I would say yes. I would like somebody to write a long story of what has ever been accomplished by freaking out, in any context. First of all, nothing is permanent. We know that the whole economy is cyclical, we're in a cycle right now, one we'd like to be out of. But also, stocks go up, stocks go down. The world changes. And so we have to have more of an idea of flexibility. Of course, that's really hard when you're looking at your portfolio and those numbers are ticking down. But as long as you have followed good advice up until now and you feel like you're well-prepared, then why change that? The world hasn't changed because of one or two days of trading.

Vigeland: So I guess as I was saying earlier this week, if it bothers you, just don't open your statement, right?

Moore: I have to say this is a good argument for denial this week.

Vigeland: Alright. Our New York bureau chief joining us once again. Thank you so much for comin' in Heidi.

Moore: Thank you Tess.

Vigeland: And for more on dealing with fear in the market, visit our Makin' Money blog.

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