It is late Tuesday night and rather than sleeping I thought I would take the time to share with you some of my own reactions to the market volatility that we are all observing.
It is not reassuring to me that the market can drop almost 800 points one day and then recover 500 the next. I shall need some Dramamine for this motion sickness soon. Hang on, the ride isn't over!
I haven't read the 100 pages of the bail-out or "rescue" suggested by the Paulson/Bush plan and amended by our legislators. What I do believe is that the free-wheeling days of hedge funds and derivatives is long over. And it is about time.
I also believe that the philosophy that "Government is the Problem" and that less regulation is always better is being shown to be a set of beliefs that are now obsolete. The failure of the financial markets may well have been contributed by the deregulation and the repeal of Glass-Steagle advanced by McCain ally Phil Gramm.
And no Americans are NOT whiners.
The greed and corruption that got us into this bind will not be easy to undo. While it is helpful to address the symptoms of the disease with acquisition of these questionable mortgage backed securities by the Fed, it is not unreasonable, much like a sovereign investment fund, to insist on equity for that investment.
This isn't any more about socialism than it is about America becoming an oil company just because we as a nation decided to acquire a petroleum reserve to protect us against the vagaries of markets.
And since much of the source of our problems derives from the collapsing real estate market, the displacement of home-owners who can no longer afford their mortgages, and the subsequent 'upside-down' nature of their loans, it would also behoove all of us to address these home-owners regardless of whether it was they or their lenders who were at fault.
To paraphrase the defenders of the current Iraq policy, it doesn't really matter much about how we got into this predicament, it is far more important to determine what we are going to do now to get us out of it!
Thus, it may be useful for the government to make banks whole by refinancing the mortgages under stress at reduced terms to keep homeowners in their homes and to reduce the need for fire-sale disposal of these homes adding to the declining price of housing and the additional failure of other home-owners in dealing with their own mortgages.
We cannot address only the banking system without addressing the homeowners who are at the bottom of the feeding pyramid and who are the ones who shall either be paying or not on these mortgages.
Much has been said about how we are going to spend the $700 billion and what we are going to need to do about cutting the budget to adjust for this expense. Actually, we need to make sure that our economy is healthy. Spending on infrastructure projects may well provide jobs and a nice stimulus to the economy more than any simple check mailed to each taxpayer.
And the rapid and timely end to our involvement in the Iraq conflict may also assist us in restoring our own financial health while encouraging our Iraqi allies to take over in their own self-determination and resolution of the conflict. As much as we would like to bein Iraq indefinitely, our nation cannot afford this for much longer.
These are just a few of my amateur thoughts this evening. I haven't been blogging much but shall keep you posted about my own trading activity and look forward to a time as the investment climate improves, that the kind of stocks we like to find will once again appear with more regularity on the top % gainers list---where we can once again discover and discuss them with you!
Yours in investing,