Stock Market Today

（I know we sorta crashed here from DOW 14000 to DOW 6500 but what if this is nothing more than a bear market rally and we head to NEW lows? Is cash or money market funds even safe at that point if things really turn ugly?)

Answer :

Big crashes only have two root causes
1) geopolitical problems (war, terrorism, coups, oil shortage , etc.)
2) problems in the financial system

TThe 1930s problems had a lot to do with bank runs. People would non-foolishly withdraw their deposits from banks because if the bank did fail, they would lose all their money.

For people to lose their deposits today, the FDIC would have to fail (money markets are also insured now). The only way that would happen is if people (and countries) stopped buying treasury bonds, so the Treasury could not give the FDIC a loan.

The US government has already demonstrated that they are willing to bail out the financial system at any cost to the taxpayers. The taxpayers will be paying the costs of the bank bailout for decades, through more debt issuance and inflation. This greatly reduces the chance of the type of problems we saw in the 1930′s and in the Fall of 2008.

Unfortunately, unless the government decide to fix the system instead of applying triage to the banks, there will be a risk of a catastrophic failure that would dwarf anything the US has experienced before. However, just to be clear, while the odds of this catastrophe are *higher* than they were *before all the government intervention* (due to taking on trillions of dollars of banking risk), this risk is still very small and “the big one” is likely a few years away.