I hope you watched the pundits and politicians last night. Many of them pulled the ‘doomsday’ scare tactic of stating that “the greatest danger is doing nothing, so we must pass this bill as quickly as possible”. I understand that many politicians will speak out of both sides of their mouth and publicly cry and wail about this proposal while they make their deal to vote for it behind closed doors during the dark of night.
I spoke to one of my investment banking friends the day of the meltdown last week. It was with honesty and a sickening smugness that he advised me to be ready to jump on his shaky bank’s stock as quickly as possible. He was supremely confident that a bailout of some kind was eminent and the beaten down bank’s stock would get miraculous healing and shoot up. There would be fortunes to be made. If he took his own advice and timed his buying and selling correctly he could have already taken out a profit of over 40%!
Just when I thought there was a glimmer of hope that a system wide bailout would not be granted to the liars and thieves, just when I hoped the government would balk at the coronation of King Henry, my hopes were dashed. I’m told that Warren Buffet is buying into troubled financials to the tune of $5 billion dollars. If Buffet is actually in for that amount, he’s as confident as my banker friend that the government is going into the bad banking business and we’re screwed!
If this thing goes through, as it now appears it will, I predict that the conflagration of the Baby Boomer’s retirement, the run up of oil, the fear of investing, the war, and runaway inflation caused by the printing of massive amounts of cash will create a recession the likes of which my generation has never experienced. Promised pensions will be eliminated and hatred between age, racial and immigrant groups will be ignited. The sad thing is, in the short term, before the crushing recession hammers us, the american people will be lulled into a false sense of security by the deflation that preceeds it. Lost jobs, frozen capital and a general lack of trust in all aspects of our financial institutions will choke off the sellers of just about everything. In order for manufactureres to keep afloat for a little longer you'll see bargain basemant prices on almost everything from gas to gold. Stocks will have to be liquidated at any cost, but this is still not the time for long term equity investing for most of us. This IS the time to be paying off your home and car so it can't be taken away if you lose your job. This IS the time to be saving anything you can for the hard times to come. When gold takes the plunge I expect, it may be the time to own something that has more value than the paper it's printed on, because there will be a lot of that paper out there!
I hope I'm wrong, because there will be no comfort in being right.
Get lots of sleep and make wise decisions with whatever assets you have in the next few weeks-your future hangs in the balance and it’s the only thing you may still have some control over.
Good luck to us all.
