Bailout Plan is Going to Fail to Pass

[Sam Spade]

Dollar is actually faring ok - up slightly.

the dollar has been kicking butt for the last two days.  Word has it that the EU is more exposed than the U.S...so the trend is expected to continue.

ya, I tend to agree.

btw, I agree with Lewis as to the actual result of this.

[Fmr. Pres. Duke]

I'm deciding on whether I want to buy some Wachovia shares to even out the one's I got burned on and hope the bailout passes or leave it alone. The shares of WB went up 98% today. $3.50 might still be a margin longterm.

[Sam Spade]

I would stay away from the banking stocks in the near future.  Today's rally was expected, but I don't think the downturn is over.  And there will be another upturn once the "bailout bill" passes, but I really don't see that as a long-term.

Stick yourself in some recession-proof stocks for the time being, or something safe.

I'm trying to figure out right now when I think housing is worth a buy.  Not yet, well especially not where I am. 

[Fmr. Pres. Duke]

I would stay away from the banking stocks in the near future.  Today's rally was expected, but I don't think the downturn is over.  And there will be another upturn once the "bailout bill" passes, but I really don't see that as a long-term.

Stick yourself in some recession-proof stocks for the time being, or something safe.

I'm trying to figure out right now when I think housing is worth a buy.  Not yet, well especially not where I am. 

I am wondering if the WB stock may get back to $5 or $6 a share, and that would sort of even out my losses when I bought it at $9/share. I want to wait and see what happens tomorrow with this bill. If it passes, I could make a quick profit and sell it off before the next downturn happens. If the bill fails, I'm just not going to look at my portfolio and ignore emails and phone calls from my broker. All he told me was not to panic.

[??????????]

I haven't even looked at my 401(k) in several months. Don't really care about it right now, it's pretty much irrelevant to me at this point. Most of my money is in my company stock which has proven recession proof over time.

[angus]

Don't count on any bill to jump start stock prices. I doubt that will happen.

These things go in cycles.  You could probably expect a bear market generally until about 2015 or so.  I was counting on something like that, more or less, even before this latest round of failures.  With a 700 billion dollar tax burden, we'll probably still have the normal bear market cycle, but we'll also have the 700 billion dollar burden.  Plus the 700 billion dollar burden from the war.  George Bush has turned out not to be such a cheap date after all.  And, because the congress chose to bail out the financial industry, instead of letting this painful teaching moment teach us the lessons of excess and greed that it ought to teach, no lessons will be learned.  So we'll soon go back to being an indebted, obese, shallow, consumer nation, but owing an extra seven hundred billion probably ultimately to foreign investors that we could easily avoid.

It's not a fait accompli, by any stretch.  I'm doing my part.  I wrote my congressman again today.  I still urge you and others to do the same.  We have the power to defeat this, collectively, and it only takes each individual a few minutes to fire off an email or make a quick phone call. 

[TomC]

I would stay away from the banking stocks in the near future.  Today's rally was expected, but I don't think the downturn is over.  And there will be another upturn once the "bailout bill" passes, but I really don't see that as a long-term.

Stick yourself in some recession-proof stocks for the time being, or something safe.

I'm trying to figure out right now when I think housing is worth a buy.  Not yet, well especially not where I am. 

I am wondering if the WB stock may get back to $5 or $6 a share, and that would sort of even out my losses when I bought it at $9/share. I want to wait and see what happens tomorrow with this bill. If it passes, I could make a quick profit and sell it off before the next downturn happens. If the bill fails, I'm just not going to look at my portfolio and ignore emails and phone calls from my broker. All he told me was not to panic.

There are so many better investments right now- for the long term. I would never try to catch a falling knife like a failing comany.

No, you should start looking for the next "best thing." Or better yet, start putting it in index funds. Most of my portfolio is in Vanguard Index funds- five stock and two bond. I watch my asset allocation- 65-25-10 usualy- and when it shifts, I adjust. That way you're selling high and buying low. A part of my 65 in stock assets, I usually have two or three stocks That I rotate in and out of- probably on average every 18 months. Right now I have ESLR, which I doubled my holding in about 2 weeks ago, FLIR, and I just bought a small position in AAPL. I don't have any now, but I also like to rotate in and out of SCHW, which I've been following for years. But no single stock is EVER more than 5% of my portfolio, and the stocks (aside from the funds) make up about 10%.

But seriously. Sam's right about banks, and further, there are much better investments than WB right now. Take the time and find one for the longer term.

[Sam Spade]

I would stay away from the banking stocks in the near future.  Today's rally was expected, but I don't think the downturn is over.  And there will be another upturn once the "bailout bill" passes, but I really don't see that as a long-term.

Stick yourself in some recession-proof stocks for the time being, or something safe.

I'm trying to figure out right now when I think housing is worth a buy.  Not yet, well especially not where I am. 

I am wondering if the WB stock may get back to $5 or $6 a share, and that would sort of even out my losses when I bought it at $9/share. I want to wait and see what happens tomorrow with this bill. If it passes, I could make a quick profit and sell it off before the next downturn happens. If the bill fails, I'm just not going to look at my portfolio and ignore emails and phone calls from my broker. All he told me was not to panic.

I would personally sell it now and get into something safer, but if you want to play around, here's what you should do:

Decide how much you would be happy with getting out of your original return.  For example, if you bought 100 shares at $9 and they're now worth $350, how much do you want to make safe and how much do you want to play with to see if it gets back to $5 or $6?

If you say $250, sell that and wait with the remaining $100.  If it gets to your sell price, sell.  If it doesn't, at least you won't be looking back saying "Dear God, I lost everything when I could have had the money then."

But most importantly, whatever you do - put it mostly in something safe.

[Torie]

There isn't much left to WB to bail out. I think all it has left is its brokerage business. Plus, booking losses to deduct from your taxes has some merit, aka tax loss harvesting. The mega banks are more likely to benefit from the bailout, since they have a lot of bad assets on their books now.

[NOVA Green]

I work for an S&P 500 company and all 100,000+ employees in the US received an email today from the CEO telling us to contact our congressmen and women to tell them to vote for a bill ASAP with a list of talking points and links for those that don't know their congressional representatives.

It looks like business is starting to push back...

[??????????]

Glad to see your business is using propaganda. What do you think is next? Veiled threats or intimidation?

[NOVA Green]

Glad to see your business is using propaganda. What do you think is next? Veiled threats or intimidation?

(laughs). I don't see anything quite that crazy, however this is the first time I have ever seen an email distribution to all US employees from the CEO on anything. 80% of our business is tied to the auto sector, although I work for the relatively small business services division.

They're presenting the economic argument for the bill from the business perspective that the President and Congressional leaders failed to do, which the American people still aren't buying.

That having been said, I don't see it changing any minds in my immediate work setting.

[angus]

They're presenting the economic argument...  which the American people still aren't buying.

Do we know that?  I'd hope that this is the case, but I have no way of knowing that without looking at some record of congressional emails or phone records.  Or perhaps polling data, but any polling data on this subject would have been done hastily and is therefore suspicious. 

[NOVA Green]

They're presenting the economic argument...  which the American people still aren't buying.

Do we know that?  I'd hope that this is the case, but I have no way of knowing that without looking at some record of congressional emails or phone records.  Or perhaps polling data, but any polling data on this subject would have been done hastily and is therefore suspicious. 

You're right, we don't necessarily know that. It still doesn't seem like that the American people are sold on this plan, or convinced that it is imperative to act immediately and without further discussion and modifications of the initial proposal.

[Fmr. Pres. Duke]

It'll pass tomorrow. If it doesn't, well, we need to drop it and let the market fix it. It will just be a painful process.

[opebo]

... My wife and I are both scientists/tenure-track faculty...we have a combined gross income of about... ($120,000)... really rich folks we're supposed to be bailing... consider me poor, as opebo does, as do many of these posters, probably. 

I don't really consider you poor, angus - in fact your income of $120,000 together with your wife is of course very neary the top of the  working class in america.  What is the median, something like half that for a family?  But you are obviously just another member of the working class, as you gain said income from toil.

I... took two graduate-level courses in economics... influenced me in ways... those courses... did awaken me to a realization of how the private sector works. 

No, your courses indoctrinated you in certain propaganda about how the 'private' sector works.  It isn't private, of course, and it doesn't work the way you think it does.  Remember, the rich are the clients of the government, and the government is their servant.  Another way of putting this is that the 'public/private' distinction made by economists and politicians is fake, phoney, deceptive, and farcical. 

But I think the best point I can make here is that those of you who want to 'let the market take its course' in order to 'discourage careless behaviour of this sort' (fezzyfesstoon comes to mind), are completely missing the fact that we want to encourage easy lending.  If a crisis discourages lending behaviour and borrowing/consuming behaviour, you end up with decades long doldrums like Japan in the 90s, US in the 30s, etc.   The solution is not to embrace parsimony and lack of progress, but to simply increase incomes to pay for the 'loans'.

Personally I find deflation a beautiful time for Keynesian redistributionist action, as one can essentially print money from nothing and there are only postive effects - no downside.   Another way to look at this is the 700 billion doens't have to 'come from' anyone or anywhere, just make it up.  It is more of an argument than a 'real asset'.

[angus]

yes, opebo, we're all working class except you.  we have been over this before.  such a stilted, victorian term, and it probably includes so many of us (about 98%), that it's meaningless.  We generally divide that great working class by education (blue-collar worker versus white-collar worker), or by income (lower, middle, and upper class workers), at least for purposes of discussions, rather than lumping 98% of us together as working class compared to the 2% who are leisure class.  It may have made sense to talk about "working class" versus "leisure class" in Victoria's England, because at that time if you ran into a fellow traveler in the far corners of the globe, it probably would be another aristocrat.  But times and technology have changed.  Nowadays, when you encounter a fellow westerner in the far corners of the globe, it's much more likely to be one of us from lower 98%, and so if you want to make meaningful demographic comparisons you might subdivide us along logical demographic lines.  But we have been over this so many times before that I begin to wonder whether you're just being obnoxious.


Just for fun, I tried to find a US household income distribution chart.  I found many from the 2000 census, but here's a more recent one.  From 2005.  It's large so I'll just post the URL here.

http://www.visualizingeconomics.com/wp-content/uploads/2005_income_distribution.gif

As you can see the mean is about 63K.  The middle 60% runs from about 19K to about 92K, with the upper and lower 20% outside that range.  We could define "middle class" as the middle 90%, in which case "middle class" household incomes range from about 15K to about 167K. 

Much of this depends on how you define the middle of the working class.  MSNBC reports that "Data aside, being “middle class” in America today appears to be mostly a state of mind. And there are very real sources of anxiety for those who aspire to a comfortable middle-class life in America."  I kind of like that angle.  Mirriam-Webster online defines the middle class as "characterized by a high material standard of living, sexual morality, and respect for property" and Free Money says it consists of "those who have attained a degree of economic independence but not much social influence or power."

Seems to be a fuzzy definition.  There's no official government one.  I certainly consider myself middle class, or "white-collar working class," if you prefer.


And, just for fun, here's a bar graph showing some CEO pay in 2006:



And here's a barchart for some celebrities, also from 2006:



(Lest we think our Corporate execs really are that overpaid) 


As for the relevant portion of your post, I do appreciate your attempt to educate.  I think we understand that there are those who want to encourage easy lending.  For example, there are programs that let you make small business loans to folks in the developing world without even meeting with them.  Those have been largely successful.  But I think we can also see that credit is far too easy to get.  When I was a 21-year-old college student I already had so many credit cards I couldn't fit them all into my wallet.  And stores are still constantly offering me fifteen percent off my purchases if I "apply today."  I have several old wallets full of credit cards.  Too many to use.  It's ridiculous.  No one needs that much credit.  And now we have a "crisis" manufactured by exactly the mentality you espouse.  Easy money.  Adjustable rates.  Bundlers.  Predatory lending.  Folks with little or no understanding of the terms of their loans or ability to meet the terms when those terms change.  Bad loans bundled and packaged for holding companies who didn't do their own homework.  This isn't something we want to encourage. 

I agree that some Keynesianism may be in order.  We saved capitalism through socialism once before.  Through good deeds and public works.  If you want to spend 700 billion dollars, why not spend it on something useful?  Infrastructure, maybe.  We have bridges falling down, potholed roads.  New Yorkers are being served water with two century-old aqueducts, neither of them tested for fear that if the hundred-year-old valves are closed, the city workers may not be able to get them to open again.  A third one is being built, but it is expected to take 30 years to complete.  Thirty years?!  The first Ming Emperor built his 4000-mile Wall in half that time.  And he didn't have jackhammers and front-end loaders!  I'm not totally adverse to some elements of socialism.  Like most voters, I am neither a Libertarian nor a Socialist, but somewhere in between.  The unemployment rate is just a little above the natural rate now.  If it goes into double-digits, then sure, let's use some revenue to create jobs.  Those roads and dams from the 30's are still around, by the way.  And getting in touch with your inner Hank Hill is a great way to remind yourself that building stuff, real tangible metalworks and woodworks and mortarworks, is worth more to the people than all the paper printouts in all the banks.  There are public measures that most voters can stomach.  But the panic and expenditure of 700 billion dollars (in order to encourage the consumerist, debtor lifestyle that got us into the trouble in the first place) isn't one of those pills that voters should have to swallow. 

This bailout is an incredibly bad idea.  I'm astonished that every talking head on TV is pushing it.  It's foolish.  It treats symptoms, but it doesn't treat underlying problems.  So if this bill becomes law, we'll only end up with the same underlying cultural problems, but we'll also have huge budget deficits even bigger than the unsustainable ones we already have.  This bill will only turn one big problem into two bigger problems.