Friday, October 1, 2010

Short Memories and Being Cute

Sometimes I wonder if those who follow Fox News and the Tea Party, and all of their friends, are just trying to be cute in front of their friends and neighbors. From all poll indicators, the GOP and Tea Party are making a comeback. That's a very sad thing to see, especially now so soon after those very same people devastated this country. They clearly say what they intend to do - or I should say undo. They clearly intend to halt and shut down the government to undo it, too. That would be a disaster, and likely the final nail in our coffin.

It is clear to me that "they" know not what they do. "They" don't know how close America came to a much more devastating disaster in the recession that they caused. They think that because Bank of America, General Electric, Ford, McDonalds and a million other companies are still churning out money (hording is more descriptive), appliances and hamburgers that everything is hunky-dory. They don't know that McDonalds just barely made its payroll the first week of Bear Sterns' crash, so close to shutting down many of its restaurants because it couldn't get credit. They don't know that General Electric was on its knees, threatening the layoffs of one hundred thousand workers in one quick sweep. They don't know that millions of small businesses tottered on the edge of extinction.

On the day that the first T.A.R.P was voted down in Congress, within minutes of the vote, I was on the phone to my Congresswoman demanding, in a rage, what the hell she thought she was doing voting against it. Was she stupid? Did she not understand that when credit is stopped, that millions of people lose EVERYTHING? Jobs? Retirements? EVERYTHING? Did she not understand that we faced 30% or 40% or higher unemployment? What are you thinking? I raged. My call was one of thousands, from everyone who followed the market. The T.A.R.P. went for a re-vote and Congress approved it. Secretary Paulsen, however, fumbled the ball and gave away the money without strings attached. President Obama's Administration has reversed as much of that "give-away" as they could, however, and the government is being paid back.

The government is, as an example, selling its AIG preferred stock for an $18 million dollar profit, the end result of bailing out AIG, one of the biggest criminals in the financial crisis. It is very unfortunate that we had to bail out AIG, but the taxpayer made money by doing it. I would really like to see the AIG executives go to jail, as would most people. What is really ironic is that the Republicans are the ones gaining in the polls, and they are the same people who are protecting the AIG executives the most! Where is the logic in that? The latest estimate of the total cost of the T.A.R.P is now down to a piddly $50 billion - not $700 billion, as the Republicans continue to say. They're lying.

Steven Pearlstein says he saw the crash coming in this article, Yes, it may finally be time to get back into stocks. He says he got "out" before the bubble burst because he saw it coming. If he saw it coming, then he's one of only a handful that did. In fact, it was so rare for anyone to have seen it coming, that I have my doubts about his prescience. He was just lucky. Now, he says, it's time to get "back in." In my opinion, he's a year and a half late. He should have gotten back in at the bottom of the market in October 2008. But, he is right about one thing. We've been in a market rally since the crash and it's about over.

The other day I sent an email to all of my investment club partners about the coming election. I said that between now and the November election, if we get the chance, we need to take as much profit as possible by selling the stocks we own that are in a profitable position. Of course, if we can't take a profit, then we'll have to hold the stocks. They are good stocks. We can wait. But, why get out now? Like Pearlstein says, Wall Street isn't going to like Tea Party Senators and Representatives. The Tea Party may have some rich corporate donors, but Wall Street, as a whole, doesn't like them. Wall Street isn't stupid, while all of the Tea Party candidates appear to be. They show every intent to shut down the government, in a childish fit, if they don't get their way. Wall Street won't like that and neither will your retirement account.

We may not like Wall Street gambling, but we should like Wall Street investing. Those are two different things. We should NOT like Wall Street gambling with the Social Security Trust Fund, but we should like investing the Social Security Trust Fund, under appropriate government controls, in a well balanced portfolio. Without Wall Street investing, our Individual Retirement Accounts would be zilch. But, we don't want our IRA accounts to be used for gambling. We need government controls. We need to vote for the people who will control high-risk gambling, not eliminate investing. So far, Republicans are not willing to do that. But, if there's a way for voters to be stupid, they'll figure out how to be it. Stand by for heavy rolls.


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