Tuesday, October 07, 2008

What Do We Do Now

Alright I've railed against the bailout quite a bit and I have tried to shed a little light on how we ended up in this mess in the first place. So to recap I have presented exactly dick for useful information for the average person and for their future. Sure maybe I have had a positive impact on how you might vote against the scummy dirtbags that voted to piss away your money, but as of now I have presented next to no real advice.

So here it is.

DONT PANIC...

In case I wasn't clear I'll repeat

DONT PANIC...

Alright now that I know you have ignored that advice here's a little more. If you absolutely need complete liquidity in the next five years, if you will completely divest yourself of your stock portfolio due to some overwhelming liquidity need, then get out of the stock market right now. I'm not arriving at this decision by myself, in fact I may have been swayed by Jim Cramer. Cramer has to be smarting in part due to his massive public attempt to draw attention to this impending financial crisis in August of last year. It must be the hardest time to find out you were completely right.

With that said and out there, if you do not need to completely liquidate your portfolio in the next five years, DO NOT PANIC. Stay right where you are and take a very long hard look at the holdings in your portfolio. If you own stock in the specific institutions that are going bankrupt, you will likely lose money. If you have high risk venture capital in your portfolio you will probably lose money. Now is the time to pay very close attention to the stable choices in your portfolio and reinforce them. If you own stock in well established, long standing companies with substantial physical resources, stay put, do not bail on those investments. If anything pull together liquid capital and standby to move into markets where the index driven market fears have driven prices to unusual lows but where balance sheets remain intact. This can be the best opportunity for substantive growth in your investment based income you will ever see if you have the time, the patience and the fortitude to ride this out.

Remember if the worst fears come true, which they wont, then it doesn't matter what you do with your money. If they don't come true, which they won't, then the best thing to do is find shelter in long term stable investments, with companies that have real property. Don't invest in companies that make money by moving money, don't by shares in your bank. Soon we will see lows that we haven't seen in years and that's the right time to buy good strong companies. If you do own high risk stocks in financial institutions, take a very long hard look at them and if you need to take a loss to get out before they fall apart then do it, but by all means do not put the cash under your mattress, there are plenty of good companies with a history of weathering storms to shift into at a lower cost than you might ever see again.

As for Congress, we have a bailout allocation and while I'm going to continue to call for their resignations for this massive socialist takeover, now is the time for forward thinking. What do we do now, not last week, but this week? The FED is out of control and needs to be reigned in and while I don't trust a United States Congressman and further than I can throw him, the Congress is the only body in a position to implement some oversight into our currency policy. There's no time like the present. We must find a way to tie the FED's currency decisions to the market in order to prevent bubbles like this in the future. Next, and I am completely stealing this idea from Cramer, if we are going to spend $700b at a time buying these bad assets, then the government needs to renegotiate them one by one and find acceptable terms to keep people paying them off, and then needs to involve private businesses in buying the rebuilt mortgages for a fair price. There is room for the market to actually grow with this new process and if we let private business participate we may yet see an overall gain from it. I doubt highly the balance sheet at government program level will turn a profit here, but they may at least be able to break even while pumping positive growth into the economy. So while I oppose buying the debt in the first place, the government has the unique ability to bend the rules, adjust the value of the mortgages and resell them at real value instead of panic value. Lets all sit back and see if that's what they do. And pay attention this program will need to be revoked at some point. We pass this garbage and then forget about it, we need to keep tight watch over it. Remember the income tax was originally designed to pay back debt from the Spanish American War. I'm not sure but I think we payed that back, but the tax is still going strong.

The next step, and one that congress should take seriously in it's lame duck session in November is to restructure the lending laws to allow institutions to implement any form of lending discrimination they see fit and let the market pick which banks get the loans. Work to find a way to make sense of bundled debt and if any new regulation is required, let it be that risk assessment criteria must be included with each individual debt bundle when it is resold.


And finally we need to make damned sure that Washington feels in it's pockets the hard hitting disapproval of their constituents. If you can't vote for your sitting Congressman's opponent because his party or policy disagrees with your ideology then by all means under vote the slot. Cast a ballot and don't mark a choice in that race. If you can vote for a third party, do it. If your Congressman or Senator made the right choice in this case, call them and let them know, then vote for them in Nov. We may not shift the outcome of the election cycle drastically this year with this effort, but we can shift the debate and we can get them running scared.

And by all means...

DONT PANIC

1 comment:

Mel said...

I have my towel & HHGG. Now I need some liquid assets to invest. Let's go.