The Market System is Working

A fall of 777 points today.  In Las Vegas, those 3 numbers mean winning a jackpot.  The consensus seems to be that the sky is falling.  I see that we experienced a sizable earthquake that has shaken all the financial experts to the core.  This is a meaningful signpost reflecting the readjustment of energy that will allow a meaningful correction to our system and set the way for a healthy reconstruction.  

Using the using the word 'bailout' turned off the ordinary citizens.  Now the world 'investment' is being used to change the psychology of thinking.  Also, the way the FDIC is taking over these large banks like Washington Mutual and today, Wachovia the fourth largest bank, is a big factor in creating the fear energy that is saturating the financial stock sector.  Look at National City Bank that went down over 60% today.  I will not be surprised if they are taken over by the FDIC this week.  After researching the timeline of Washington Mutual, there is reasonable doubt that the FDIC acted in an appropriate manner.  They have been acting in haste without foresight to the ripple effect to the financial system.  In my opinion, these actions are much more damaging to investor confidence than the House rejecting the $700 bailout and are leading the charge in fall of the stock market.

I think that there is more illusion and fear about our financial system than what is real.  So I am optimistic that we collectively can make a difference by acting in our integrity, reducing debt in order to be free from control of the system, and by investing where there are great opportunities.  Our country does have a strong backbone and we will weather through this.

Washington Mutual Takeover

Yesterday, I sent messages to Roy Blunt (House Minority Whip), Richard Shelby(against bailout), plus Feinstein, Boxer,  Herger, and Wolf Blitzer at CNN regarding the government taking over Washington Mutual and how it is in stark contrast to what the House Republicans want using private investment versus taxpayer money to help the financial sector.  This is what I wrote specifically to Mr. Shelby:

"Last night's (9/25) FDIC takeover of Washington Mutual was an action that is in contrast to what the Republicans are recommending on this bailout; that private investment should be encouraged versus taxpayer money.  In March, a private investment group invested $8B in Washington Mutual.  Today that investment is worth practically nothing as well as for the individual investor.  Why was the biggest thrift with over $300B in assets taken over in this format?  What foresight or consideration was given in comparison to what is being recommended?  I see lack of continuity with what the Feds are doing and what Congress is saying.  That is the primary reason for the distrust with the average citizen.  I am glad there is such a turnout protesting this bailout all across the nation.

Also, the current Washington Mutual CEO has been on the job for 16 days and has a severance package of $19M.  THe previous CEO left with $57M. This kind of reward has no bearing on the actual performance and thus again, another reason to look at Washington as being out-of-touch with reality.

In an earlier email to my congress representatives this week, I indicated my opposition to the bailout plan and why.  More debt of that magnitude added to the already enormous debt load makes us weaker as a nation and provides less room to maneuver with the world.  I think the market forces should be allowed to take the path that corrects the excess in the housing market.  Yes, it is painful, but the pain will be much shorter than trying to come up with a plan that will only delay the inevitable. And those of us alive today should bear the brunt of this fall: not our children, grandchildren, and those to come.  Thank you for considering my view."

My opinion of the $700B bailout

After much thought, I wrote the following letter to Ms. Feinstein, Ms. Boxer, and Mr. Herger.  I tried to mail this to Christopher Dodd who heads up the committee on finance, but he only accepts mail from citizens of Connecticut.

"I am representative of the ordinary citizen who has money invested in the stock market and have seen it drop by 50% in the last 3 months.

After reading and hearing about the $700B bailout plan, I am OPPOSED to it being passed.  The fact that this is a guess without knowing the ramifications until it actually happens is too big a risk.  Also, as a citizen, I am against buying 'toxic mortgage debt' that no one can discern as to who owes who and the valuation of it is unquantifiable.  I think that the excess that has occurred because of the bubble in the housing market needs to be corrected by allowing the market forces to take their way.  This destruction allows us to reach the bedrock and allow for reconstruction.  More debt to our already staggering balance only makes us weaker as a nation.  Collectively, we all need to learn how to manage debt and not let it get out of hand.  The time is NOW.

Thank you for reading my view."

I feel strongly enough about this subject to write to these representatives.  I welcome reading your opinion here.

Red Flags

Emotions of the collective are ruling the roost.  The European markets are showing their level of confidence in what congress is doing with the proposed bailout by the Feds.  With a big run to commodities, especially oil at a jump of $25 in one session, that is a sure sign that there is information in the subconscious about to surface that reflects a stark picture of our financial system.  

Democrats and Republicans are working to add more to what the Fed recommended to stabilize the system.  Making the government have access to owning the company's stock who sells the 'toxic mortages' is a form of nationalization like what happened with Frannie, Freddie, and AIG.  This dilutes the value for the stockholders, like you and me.  Even those big mutual funds and institutions holding shares are made up of contributions by the individual.  Now we have an idea of the exposure of number of companies that may have their shares diluted by just looking at the list where short selling is not allowed.  The list grew bigger today.  

One other addition I would like to comment on is a provision to help mortgage holders prevent foreclosure.  What about those who have the financial capability to pay their mortgage, yet walked away because the loan is worth more than the home?  What percentage of the overall defaults are made up of these individuals?  They do not need to be rescued.

Going back to my original post of 9/15 and talking about the 'Big Bang,' the latest is the collider is out of commission for at least two months.  I predict there is a timeline similar for the markets and the turmoil to continue.  

The Unquantifiable Bailout

We are definitely living at a time of great change mirrored in the financial arena of the world.  The citizens of the U.S. are going to assume more debt, collectively, to rescue the financial sector due to dire consequences of what would happen if we don't.  When congressional leaders, the president, and the Fed got together last night and listened to what lies ahead, there was a stunned silence of 5-10 seconds.  When politicians have no words for that period of time, there is a landscape portrayed that none of them have experienced before.  The total liability is not measurable as this time, but 'hundreds of billions' means closer to two to three trillion.  I worked in the defense industry for 20 years and no contract met its original estimate, especially those funded for new design and technology.  We are dealing with the same here.  The ones deciding what to implement to save the U.S. financial system are having to be creative.  

This 'Plan' covers toxic mortgage-backed securities that banks hold.  The government would take these off their hands, hold them, and try to sell them again at a later date after they figure out the maze of who owes who. 

Today, the SEC put out a list of 799 financial companies that are excluded from the short selling list.  I think they should have excluded all companies like Britain did under pressure from us.  

Has anyone started talking about the bond insurers yet?  They are a new wrinkle in this financial fabric that is being sown.  Today ABK dropped 42% and it was on the excluded short sale list.   Our system has evolved to be so expansive and intricate that no one person or group understands the total ramifications of our actions.  Keep looking for the red flags like ABK.  There is a blind path here that takes a special dance.  We are only learning what the steps are.

We are only 11 days away from October, the month that has historically reflected major changes for the market.  What does October 2008 bring?

Haven for Bad Debt

What a surprise on Wall Street today.  Look at the power of words from the right person to change the emotional collective in a flash.  If this entity is set up by the Fed, I would ask 'who' gets to put their bad debt there?  What is the criteria to qualify?  Do you have to be 'too big' to fail, have too much 'influence in the world markets?'  To save the group i.e. us, bad decisions and greed are being rewarded at the top levels.  I have heard all the reasons why we had to save Freddie, Fannie, and AIG, but as history shows, when there is a bubble in some sector of our economy, the latest being the housing market and mortgage downfall, there is an underlying correction required before the solid foundation is felt again.  What we are doing here is trying to buy time because of the fear that the foundation will crumble too.  Destruction, construction, and renewal are the cycles of life, at the individual and collective level.  I am enjoying the creative energy on the part of the Fed and SEC in trying to prevent what is normal.  

A major change today was Britain banning 'all shorting of stocks.'  Does that mean the U.S. is headed in that direction too as one of the tools in our basket to try and stem the downward spiral?  It looks like anything goes here.  That statement is what created the problem with the mortgage market.  We are repeating ourselves under the disguise of doing in a different way.

Fed Investments

Based on the Fed deciding to 'loan' $85B to AIG today, and also own 79.9% of the firm does not compute.  It seems they now own the majority of the largest insurance company in the world, adding to their portfolio of FRE and FNM.  I can't imagine how much more debt they are exposed to with insurance liability along with being exposed to several trillion of mortgage guarantees. Is there a limit as to how much this country can create by printing money and still look 'stable' as the S & P recently determined? Is there an invisible line that we are close to crossing to the point of no return where the market will determine the direction of the financial system?  If so, that means the collective consciousness will have the power.  Thoughts to consider as we enter day 3 instability with the stock prices of the financial sector.

Big Bang

Did you hear about the successful experiment  on the Swiss border simulating how the universe was created called the 'Big Bang?'  It was a few days later when this energy hit our financial markets with Lehman going under and Merrill Lynch being rescued.  There is a ripple effect continuing to affect other banking and insurance companies.  The big ones are known, yet there are more in the subcurrents soon to surface.  I thought the U.S. stock market did well, absorbing the shock of the downfall of these institutions.  I was caught in the October 1987 crash , using margin, when the market lost 22% in one day.  Given only a 500 point drop, about 3%, all the hysteria, fear, and uncertainty, was quite contained.  So far resiliency seems strong. Yet the human condition is to act in emotional ways, so tomorrow may tell a different tale.

I look at life and reality using symbols to find the meaning or purpose to the experience or event.  And I am looking at the deterioration and failure of our big and mature financial companies to see what the big picture is.  We are overdue for a 'fall' given the republic has been around for over 200 years.  The last few years has been one of single focus on accumulation of money, real estate; all in the material arena.  It seems that the pendulum is swinging in the other direction now, taking away the material attachments.  Even Mother Nature is contributing to this through hurricanes.  Events seem to be running in parallel with each other, pointing in the same direction.  Perhaps it's time to shift life's perspective back to what is important; people and relationships.  When all the material is gone in one sudden change, what is left are those we care about.  Given what is happening at this time in evolution, we are out of balance.  It has reached a critical mass and change is being reflected in all aspects of our lives in a big way.