Posted on 10/02/2008 5:53:39 PM PDT by Syncro
There was a time I wrote extensively about promising sectors and stocks. I looked at companies' new products, analyzed earnings and tracked moving averages of securities big and small. I miss those days.
In recent weeks, those fundamentals have all but ceased to matter now that politicians are pulling the economy's strings. From restricting trade, such as through the short-sale ban that was just extended, to outright seizure, as was the case with AIG (AIG: 4.02*, +0.09, +2.29%), we are witnessing the biggest expansion in government power since the New Deal.
Power is precisely what the "bailout" bill, which cleared the Senate Wednesday night, is ultimately about. Uncle Sam wants even greater control over the economy, your money and your life.
When Warren Buffett takes multibillion-dollar stakes in General Electric (GE: 22.18*, -1.29, -5.49%) and Goldman Sachs (GS: 128.64*, -4.70, -3.52%), he does so voluntarily and with full knowledge he might lose money in the process. Witness the substantial loss incurred by private equity fund TPG after it invested $1.35 billion into Washington Mutual at $8.75 a share, a trade that has now become virtually worthless.
Whatever securities Treasury Secretary Hank Paulson or his successor choose to purchase, whatever prices they choose to pay, they'll be made with taxpayer dollars but without taxpayer consent. In permitting him to do so, our government is taking an enormous leap of faith, assuming that bureaucrats in Washington are better investors than the individuals and corporations who, unlike Sen. Chris Dodd (D., Conn.), Sen. Mitch McConnell (R., Ky.) or even Secretary Paulson, actually do this for a living.
Suddenly control of those assets, and indeed an even bigger swath of the American economy, is no longer dispersed among millions of individuals making decision based on their own best interests, but centralized in the nation's capital, and being managed by those without a direct economic interest in the game. And while you can trade any stock or bond in your portfolio at will, when the government’s investments in subprime mortgages or Bear Stearns doesn’t turn out, it's the taxpayer who eats the cost.
Their goals are vague and undefined. Republicans stress that, by buying "toxic" paper, the Treasury can cleanse the system and might make a profit when credit markets improve. Democrats point out the government will be able to modify the terms of purchased loans, ideally giving stretched homeowners a better chance of staying out of foreclosure. Both point to the need for government action to "calm the markets."
But as I've pointed out repeatedly over the past few weeks, what has caused the market's volatility isn’t the lack of government action, but fear of it. After all, it's the short-sided, pragmatic rush to pass a bill -- any bill -- that spawned Sarbanes-Oxley and the Patriot Act. And while there's no way of precisely knowing the economic fallout of not passing the bill, the unintended consequences of such a draconian scheme are equally unimaginable. Every move the government makes, from banning short-sales to offering to insure money-market mutual funds, affects trillions of dollars of private capital in unfathomable ways.
Of course, those are just the grand plans. Included in the "Emergency Economic Stabilization Act of 2008" are tax earmarks (read: breaks) for children's toys, energy-efficient dishwashers, Indian tribes, auto racing tracks and (wait for it) wool research. (See Sec. 325 if you don't believe me about the wool.)
Government efforts to stabilize the market have only distorted it, making traditional analysis virtually impossible. Beyond buying some shares of Japan's NTT DoCoMo (DCM: 15.75*, +0.17, +1.09%) and making a few currency trades, I’ve allocated virtually no new capital in recent weeks. How can I or anyone else invest for the long term when the rules are being rewritten on seemingly a daily basis?
It's not the proper role of government to prop up stocks, housing or any other market. Yet like the vaudeville performer on the old Ed Sullivan show, politicians now see their duty as to keep the plates spinning just a few more months, maintaining constituents in their homes and jobs at least until after the elections, without any thought to the long-term cost being paid to do so.
Who deserves a bailout? Nobody. Not white-shoe investment bankers in Mercedes SLKs nor unwed pregnant teenagers missing payments on their subprime loans. Most Americans understand this.
What Americans don't get, however, is that the goal of the bill isn’t to help Wall Street or Main Street, but to centralize power in Washington. Not surprisingly, that's where its biggest proponents just happen to reside.
The last sentence sums it up:But as I've pointed out repeatedly over the past few weeks, what has caused the market's volatility isn’t the lack of government action, but fear of it. After all, it's the short-sided, pragmatic rush to pass a bill -- any bill -- that spawned Sarbanes-Oxley and the Patriot Act. And while there's no way of precisely knowing the economic fallout of not passing the bill, the unintended consequences of such a draconian scheme are equally unimaginable. Every move the government makes, from banning short-sales to offering to insure money-market mutual funds, affects trillions of dollars of private capital in unfathomable ways.
What Americans don't get, however, is that the goal of the bill isn’t to help Wall Street or Main Street, but to centralize power in Washington. Not surprisingly, that's where its biggest proponents just happen to reside.
BUMP!
They have to be thrown out of office regardless of party or previous sentiment.
I’m seeing the potential for a pretty good land grab in the bargain.
Yep.
This is the most disgusting boondoggle I’ve ever had the misfortune to witness.
One question I have, as do many others, is when the hell is someone going to jail for this?
Duh, the American people do get it.
What we don’t get is why we are doing it the communist way?
There’s a lot of state land around where I live. It’s full of old foundations of former farmhouses. The old timers say that those were farms till the depression when they were foreclosed on and the government came in and bought them up.
A few months back the DEQ here in Michigan was approved for millions of dollars to buy land. I wondered where they were going to find the land but now I’m starting to get the idea.
Probably never. There are several hundred who should be imprisoned and are also called "Congressman" or "Senator". We must remove them from office in November. If that doesn't work, individual states should start thinking about and working towards secession.
Surely you jest. The congress critters are going to get hundreds of millions in campaign contributions from the Fat Cats they are buying the bad loans from. When they get done rewriting history they will be heroes.
Public schools keep the sheep stupid. The government education system is the opiate of the masses. I managed to escape their influence because of Rush Limbaugh and the fact that I am an irreverent, cynical, sarcastic dick who didn't respect my teachers.
Biden: “Bosniacs” (imagine if Sarah made that same gaffe)
Fox News | 10/2/2008 | Joe Biden
Posted on 10/02/2008 7:14:33 PM PDT by Notwithstanding
http://www.freerepublic.com/focus/f-news/2096275/posts
Anyone have a list of the Presidential and V.P. debate moderators
over the past 40 or so years?
Posted on 10/02/2008 1:21:56 PM PDT by FreedomForce
http://www.freerepublic.com/focus/f-chat/2096061/posts
Can someone please explain something to me. I’m a smart guy, but this one defies my logic.
Biden says in the debate that he and Obama support letting bankruptsy courts change the interest rate and principal on mortgages.
If that were law, why on earth would anyone ever, ever, ever lend someone money for a home in this country? I mean, I lend Bob $100k at 7%. He defaults. Now, intead of getting the property or my money, I now own the note for $70k at 2%.
I wouldn’t invest in companies that make loans, and I wouldn’t want my money in a bank that makes them.
The only thing that makes sense to me is they are talking about loans owned by the gov’t. In that case the gov’t owns the note and is giving the gov’t the right to change the terms.
Have the scumbag reps and senators called EVEN ONE EXPERT TO TESTIFY?
Thanks for all the bumps and comments.
Agreed. There needs to be many public serpents out of a job. Soon.
“When they get done rewriting history they will be heroes.”
Unfortunately, that’s a fairly good possibility.
I’d personally like to see them tarred and feathered, or worse.
The country has been blackmailed by the powers that be.
Bush probably plans to head to Paraguay to reside on thet compound the family bought complete with heli-pad.
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