A Beacon of Light in the Darkness

Paulson's statement of not buying toxic mortgages was great to hear today, especially since I was opposed to the $700B bailout.  This move is in the direction that I am moving myself, away from debt.  The focus needs to be at the bottom, helping people refinance.

The market managed to stay above 8,000 which I use as a measurement stick for stability.  Another fact to note when you hear that this crisis is the worst since the depression is the employment numbers.  Keep in mind that unemployment is 6.5% and will get larger.  But in the early 1930s unemployment was 25.6%, and the early 1980s 10.8%.  It's true that the cause of this recession and unemployment is different than the past, but historically 'bubbles' do pop and we get to experience the downside.  I think since the world is now tied together in one financial web, it creates more fear and hysteria than before.  That is the unknown as far as what lies ahead.  How effective are we as a country in working with all the other countries who economies are tied into ours?  We are finding this out step-by-step.

I have been watching the insurers AIG, GNW, and MBI and can see that based on the stock price movement, more government action will be needed beyond The $145B loan to AIG.

And the big three automakers, GM, Ford, and Chrysler should NOT be bailed out without wholesale changes.  GM and Chrysler should be combined to save on overhead, management, and general and administrative costs.  All of them should reduce the price of their vehicles to recapture costs only for a defined period of time to keep the cash flowing.  Doing business the same way means more bailout money required.  There should be an accounting of what has been planned and accomplished according to this plan with the $25B they have already received from the government.  Rescuing without a comprehensive radical change in the way they do business is only delaying the inevitable.  With 1 in 10 jobs being at risk, it is even more critical to act in a manner that is decisive to stop the cash hemorrhaging.  

Another item of interest today was GE has been backed by the FDIC for $139B of their capital debt.  Look at how fast this $700B is being spent.  Do we really have an understanding of how much money has been loaned in total beyond the $700B approved by Congress?  It has to be in the trillions.

The Relationship of October with the Stock Market

October is being October.  What is happening is not surprising except that it is happening on a much larger scale.  The U.S. market only dropped 2% today.  The foreign markets are a different story.  Japan falling 952 points, the largest drop in 21 years.  Russia dropping 10% and stopping trading until Friday, and Brazil also with a 10% drop, and the beat goes on.  Raise yourself above the earth and all the activity going on here.  This is a time of global change.  It's starting at the top and will affect all of us individual inhabitants.  We need to be creative and look for new ways of thinking and doing in this world.  Obviously, for those of us living today, we are ready to face the challenge, individually and collectively.  With this approval of the $700 billion bailout, we knew before it would be more than $1 trillion.  Today, we loaned AIG double digit billions in addition to the $85B.  Then it comes out that this company spent close to half a million at a California resort to have a rest and relaxing adventure for their top insurance sales people.  This kind of excess is being exposed and will continue to keep the passion energy high to make sure change is permanent and not forgotten easily.  There needs to be a purge and it is underway.  Look at this as part of our history and the timing for a 'fall.'  I think the market will settle above 8,000.  By that time there will be much purging in places that we have not even imagined.  I appreciate your own thoughts.

'Consumer Protection Plan'

The bailout is now called the subject title to help influence the individual's psychology to make this $700B investment more palatable.  I have done my best to influence who I can to prevent this because of how I feel about the children and grandchildren footing this bill ultimately.  I understand the concept that the government will buy toxic mortgages and hold them to sell at a higher amount later when the market is better.  Unfortunately, I think these mortgages are foreclosed homes that will be sitting vacant, and subject to vandalism, until the bottom of the housing market.  It's questionable if there will be any profit to pay against the debt.  I do think it will pass tonight and is the step to leaning on the house to pass it too.  It's unclear how much euphoria there will be and how long it will last, but the financial sector is definitely a place to be if you are a 'trader' i.e. in and out in the short term.  

May the highest good be served for all of the 'inhabitants' of this world with what is destined for the collective soul growth.  This means everyone, not only humans.

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.