Wednesday, October 08, 2008


Haven't watched the town-hall debate yet, but it sounds like Obama won according the pundits on both sides. Best I've heard from a Republican (not those paid by the McCain campaign) is a tie, which translates to "aw shit."

Anyway, I have to figure out who I'm voting for north of the border next Tuesday. I'm getting the calls and telling the parties I don't support to fuck off in the nicest ways possible.

Economy! Man, I don't remember the last time I talked about it. See, I'm on vacation, but I'm still watching the business networks and news networks like they're Teletubbies for an acid freak. (Let me tell you, CNN International? WAY more entertaining when there are British accents.) It appears the markets didn't quite support the most braindead bailout plan ever. Whoops. You know who else won't support it? The voters who told their congressmen and senators to vote AGAINST it. Look for some serious turnover. It ain't good for McCain either, who is trying his damnedest to distance his campaign from the current administration with everything short of changing the party name. Of course, when you crow about how instrumental you were to getting the bailout approved...

Before I go any further, although I don't think I've ever said what I do for a living, or who I do it for in this forum, anything I say here ever is PURELY my opinion and doesn't reflect on my employer in any way, shape, or form. Hell, I'm on vacation right now, so I'm not even near my desk. I figure I should put that out there just in case.

Hoy's got a few lengthy posts about this subject up too. I've got a couple lengthy comments in his posts. In short, I pretty much agree with him, although his understanding of how preferred shares work is fundamentally wrong. Adjust the plan he describes slightly to actually mirror Warren Buffett's moves (preferreds + rights to purchase shares), with a slight alteration (non-voting share rights, or an agreement to exercise and immediately sell) to preserve independence of the banks, then it's not a bad one. Some changes to tax law to encourage long-term investment would be a nice touch too.

Oh, and don't get comfy, because the floor is a long way down still. The Nikkei 225 is currently down nearly 10% today, the Hang Seng down 5.55% almost 7%, and the rest of Asia in similar shape (Jakarta just suspended trading). Remember - these are the indices that Sony, Toyota, Nintendo, Honda, etc, etc, all call home. Oh, and the British government is stepping in with 90-100 billion (pounds likely) for their banks... but they'll be buying STAKES in the banks, not the crap on their books. Of course, this is raising cries of nationalization of the banks, and other cries of "so what you poofter? you got a better idea? blimey!"

**ADDENDUM: Moscow market drops 14%. London's opening down 2.5%, and that's after the bailout was announced, which it turns out is two tranches of 25 billion pounds and some "special liquidity" thing. Paris and Germany down 4-5% as well.

**ADDENDUM 2: The main Moscow index is shut down until Friday. FTSE is down 5%, Paris 8%, and Germany %6. Middle East markets also down comparatively. Man, it could be an ugly day on this side of the pond. I'm going shopping.

No, this bailout helps nobody but the banks. It won't guarantee credit liquidity, and if history has proven anything, it's that if you let the financial world get away with something, they'll keep doing it. This is exactly what they're doing. $700 billion (a sliding window, by the way... it's $700 billion at ANY GIVEN TIME, so once that drops to $650 billion, they have $50 billion to play around with again) of bad debt off their books at inflated prices means they can show a better bottom line at the end of their fiscal year (this month for many) and pay everyone slightly less-terrible-than-expected bonuses. Yah, it won't open up a drop of liquidity, change a single mind that matters, create a single job, save a single home, or do anything else positive. It's a disaster.

Now, I'm not necessarily a contrarian, but when markets make large moves, there are opportunities everywhere. If your advisor hasn't called you recently (even just to say "hi, everything's cool... don't panic", fire them and find someone who knows what they're doing and can help you take advantage. It's easy to be a genius when everyone's making money. I don't have any specific advice, but the strong companies tend to come out of these things even stronger than when they went in. Hell, mirror Buffett if you want. If that's not your thing, look for exchange-traded funds. The biggest gains are right after the bottom, and most people get in way after those gains have been made. Is this the bottom? I don't think so, but we're getting closer with this panic selling. If you have the money, and balls, to risk some short-term loss, your long-term gains could be fantastic.

Of course, me being a procrastinating, lazy donkey, I probably won't do a damned thing one way or the other. Maybe I should look into a managed account and pay the exorbitant fees...

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