Monday 9-29-2008
What a day! Some bad and some good. At the moment, the huge winners in my opinion, are the free-market system and our system of elected and representational government. The people spoke in droves against the 'billionaire's bailout' and at least a few of our representatives listened! Keep in mind, this bailout is far from dead, and the ‘new’ version was barely better than the first version that the President and future 'Czar" gave us. I still think it will be repackaged with even more fear mongering and threats in the next few days. Congress is taking a recess after another session of childish finger-pointing. These folks have no clue or conscience!
Wall Street pundits and politicians, those with a direct vested interest, will scream that ‘this (today's market frop) is what you get’ for failing to pass the bailout plan. The market movers will use the market drop as blackmail to get another vote on the bailout plan. Keep in mind that most of the numbers were already low before the vote (unemployment, the DJIA, NASDAQ, etc.) and a 'yes' vote did nothing to guarantee that it would’ve changed that. I see no connection between the proposed bailout and a fix of the underlying problem! They can give all the cash they want to Henry Paulson's pals, but it won't stop the decline of this economy or the rapid devaluing of the stock market. If you were responsible, had a broad range of investments and diversified, as you should have, today’s loss wasn’t as painful for you as it was for the major stock gamblers. If you were already looking at the probability of a recession and had moved into stocks and commodities that hedge against it, you weren’t hurt at all. Gold went up. Wal-Mart held quite steady. Oil and gasoline took huge drops making our cost of living a little lower. If your broker didn't warn you of this, he/she wasn't much of an advisor. If you still own stocks, my advice is to get out. Pundits would call me a coward for that advice. I'll call you a fool if you listen to the folks who were blind to the obvious. This kind of volatilty and carnage is only the begining. The gamblers no longer trust the house, so nobody is willing to gamble. This 'bailout' has nothing in it that will rebuild trust, so everyone will liquidate and move to cash as soon as they can or as soon as they're forced to. The beginning of the end....
On the other hand, our elected officials, for whatever reasons, made a choice to maintain the “American Way” by sticking to a free market system, refusing socialism, and refusing to empower a ‘czar’, who was at best, blind to the problem, at worst an active participant in it. Well, at least they pretended to do what's right. One analogy that comes to mind is that of an athlete having a badly sprained ankle. A sprained ankle is a very bad thing, but pump enough painkillers into the athlete, throw on some tape, and he may be able to return to the game in some lesser capacity. He won't be cured by any means; in fact, odds are greater that he'll be injured worse and for a longer period of time! The athlete may score some more points, but eventually that ankle is going to snap completely and then we’ll lose him for the entire season-or worse. Putting a cast on the ankle requires time but will eventually lead to healing and return the athlete to the lineup. We won’t like it, but it’s the lesser of two evils and in the long run leaves us healthy. The markets have to be purged of the gamblers who played with derivitives and credit swops. The free market has to set prices again. The rules can't be changed during the game or nobody will play!
Throwing billions at the 'financial' problem would’ve only been a temporary painkiller and tape-job, it wouldn’t have changed a thing in the long run. It sure won't stop the gamblers on the sideline betting on when the guys ankle will finally snap! If the recession that follows this mess (no matter what) cleans up the markets, clears out the fraud, teaches everyone (especially billionaire speculators!) to live within their means and at the same time gets us to pay attention to the things that count in life, it can be a positive….in the long run. That’s the problem, we’ve been programmed to expect instant gratification. We’ve been told that there are so many ‘things’ that we ‘deserve’ and that we have a ‘right’ to, that we forget our simpler past. There are better prescriptions for this problem than giving up our system of economy and government while saddling our kids with the bills and the mess. There are ideas in these links that cost nothing and may actually make this process less painful:
http://www.reuters.com/article/politicsNews/idUSTRE48O9WP20080925?feedTy...
http://townhall.com/Columnists/JerryBowyer/2008/09/24/the_bowyer_bailout...
http://www.businessweek.com/the_thread/hotproperty/archives/2008/09/alte...
http://www.cnsnews.com/public/content/article.aspx?RsrcID=35700
