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TERRY MORAN (ABC NEWS): The reach of this financial crisis extends well beyond Wall Street. Anyone with the slightest share in the market is now feeling the pain directly. And as credit dries up, and hiring freezes begin, even those without a stake or a share will bear the brunt. So what should you do? We asked some of America's brightest financial minds for their advice.
TERRY MORAN (ABC NEWS): What a nightmare. Markets plunging. Banks failing.
PRESIDENT GEORGE W BUSH (UNITED STATES): This has been a deeply unsettling people for the American people.
TERRY MORAN (ABC NEWS): Government officials firing away day after day, trying something, anything, to stop the financial bleeding. In all this chaos, what can be done? What should you do? Well, first our experts say we need to recognize that we are in fact in a panic, an irrational mob psychology gripping the world and almost no one is immune.
MELLODY HOBSON (ABC NEWS): You find your chest heaving a little bit. You find yourself breathing a little heavy, and you find yourself feeling uncomfortable. And that's how I felt. I didn't feel fear. I felt discomfort. And the way that I would describe it, it's like, if you're in an accident, it's the fear of the accident that's often worse than the accident itself. And then when you're in the accident, you're sort of in shock.
PAUL KRUGMAN (ECONOMIST, PRINCETON UNIVERSITY): People are afraid to have anything in their hands except a US treasury bill or, as some people say, bottled water. There's just, you know, this terror is going to be extremely destructive if it goes on for even a week.
TERRY MORAN (ABC NEWS): And that means we need action, action now, coordinated government actions across the world to pump money into banks, guarantee lending and get the heartbeat of the global economy going again.
PAUL KRUGMAN (ECONOMIST, PRINCETON UNIVERSITY): What you need to do in the panic, and it's not rocket science, it's actually happened before and we know a lot about, it is you need to have the government put capital in.
TERRY MORAN (ABC NEWS): That kind of effort may already be underway as finance ministers from the world's biggest economies are gathering in Washington this weekend, and once again, today, President Bush spoke to the nation.
PRESIDENT GEORGE W BUSH (UNITED STATES): We are a prosperous nation with immense resources and a wide range of tools at our disposal. We are using the tools aggressively.
TERRY MORAN (ABC NEWS): So government is on the job which may or may not be reassuring to you, depending on your point of view. But the real question here, what can you do? Let's start with what most experts say you shouldn't do. You shouldn't bail out and sell all your stock in, well, in a panic.
MELLODY HOBSON (ABC NEWS): In these kind of environments where you have this type of panic selling that we've seen, you're just locking in huge losses which, you know, I study the great investors. Warren Buffett is not selling in this market. That tells me everything I need to know.
TERRY MORAN (ABC NEWS): So don't sell all your stocks. Now, let's break it down and get specific. Let's start with a 25-year-old. What should a young investor be doing right now? Well, they've got an advantage.
MELLODY HOBSON (ABC NEWS): The great thing that they have on their side is time. So let's just assume they retire at the traditional age of 65. They have 40 years to ride out the ups and downs of the stock market. That is a gift.
ART HOGAN (CHIEF MARKET STRATEGIST, JEFFERIES & CO): The last thing you want to do is be selling at this point in time. You should have a pretty heavy and risky exposure to the marketplace and the long-term investor like yourself is going to experience some ups and downs, but hopefully, you know, the end result of that is that you're gonna do better than having the more conservative investments.
TERRY MORAN (ABC NEWS): How about those of us in the middle ages? What should a 45-year-old investor be doing? With the kids' college expenses or weddings looming ahead.
ART HOGAN (CHIEF MARKET STRATEGIST, JEFFERIES & CO): I'm going to have a cash event that's coming up sooner rather than later, inside of five years, let's call it. And when that happens you have to adjust your portfolio so that you've got cash or cash-like products in it and not wait until the day before your tuition bill comes and then have to sell, you know, your Google at $300 instead of having sold it at $500.
TERRY MORAN (ABC NEWS): And one more thing for our middle aged investors our experts agree on, keep contributing to your 401 (k) plans.
ART HOGAN (CHIEF MARKET STRATEGIST, JEFFERIES & CO): 401(k)s for the most part, or largely, are the only ways we're going to have a retirement program. You know, there's, you know a lot of questions about the stability of the social security system that you and I are going to depend on years from now when we retire. But also, you know, most 401(k) plans are, you know, employee sponsored and have a match to it too. So you don't want to leave money on the table. So contributing to a 401 (k) plan is, regardless of market conditions, is the thing to do.
TERRY MORAN (ABC NEWS): Finally, what about seniors what should a 65-year-old investor do? This crash has been so devastating for so many older investors.
PAUL KRUGMAN (ECONOMIST, PRINCETON UNIVERSITY): It is difficult if you're anywhere close to retirement, a lot of people in this modern world rely on their 401(k)s and I don't have any good advice except hope for better leadership.
TERRY MORAN (ABC NEWS): But you can do something.
ART HOGAN (CHIEF MARKET STRATEGIST, JEFFERIES & CO): You should be, you know, for the large part in cash or a like cash product. You know, you have seen some damage that's been done to some of your investments and your 401(k), but you don't need all the money in there all at the same time. And start, you know, taking that out at a reasonable clip and get good advice.
TERRY MORAN (ABC NEWS): So it's been a terrible month, right? But maybe in the crash of 2008 and all the changes it is bound to work in our lives, maybe there's a silver lining. The end of an era, the beginning of something new.
PAUL KRUGMAN (ECONOMIST, PRINCETON UNIVERSITY): We talk about the greatest generation, right, and the greatest generation was formed in part by the experiences of war but also by the experience of the depression. From the understanding that things that can go very badly wrong, that you need to pull together to deal with crises. I think a lot of skepticism about the kind of high-rolling, high-living style, the masters of the universe on Wall Street have been pretty thoroughly discredited. This is going to be - I don't know how it's going to play out, but I think we're probably going to see a more restrained, maybe more altruistic, but certainly more chastened culture coming out of this than what we had before.
TERRY MORAN (ABC NEWS): So maybe we'll all just pull together after the crash of 2008. Maybe. At the very least, it's a wake-up call for us.
TERRY MORAN (ABC NEWS): When we come back now, Barack Obama and John McCain try to solve our economic problems.
TERRY MORAN (ABC NEWS): And John McCain tries to solve the problem of his increasingly angry rallies.
ANNOUNCER: "Nightline" continues from New York City with Terry Moran.
Originally broadcast, 10.10.08