Yippee! Bailout package fails to pass House!

A wise man said:

"These capitalists generally act harmoniously and in concert to fleece the people, and now that they have got into a quarrel with themselves, we are called upon to appropriate the people’s money to settle the quarrel."

Why am I glad that the bailout package didn't pass, sending the market down almost 800 points?  Because it was a terrible bill, and we can do better.  This was like putting an arsonist in charge of putting out a fire.  This bill would not only have bailed out the institutions that deserved to fail, but also the failed executives that ran them into the ground.  Worse yet, it would have given near-dictatorial powers to an unelected official, the Treasury Secretary, whose actions would not be subject to Congressional oversight or judicial review.  A blank check for $700 billion, with no questions asked.

No thank you.  There will be another bailout package (and this won't be the last one, either, but that's a subject for another post.)  In the meanwhile the market went down 7%, but the companies with real assets and real balance sheets will come back.  Those who don't, like commercial banks, brokerage firms, insurance companies, investment banks - sorry, almost forgot, we don't have any more of them any more; one investment bank failed and the last two changed themselves into holding companies - will go out of business anyway.  I stopped adding up the total bailouts when they went over $1 trillion.  Lehman, AIG, the FDIC, the auto companies...there are a lot more to come with no end in sight.  The only reason the US Dollar hasn't gone off a cliff is that Europe and Asia have their own problems, and all currencies are weakening together.  Gold (and silver) should be soaring against ALL currencies, but those are kept under wraps on the futures exchanges. 

The answer is to buy physical metal, like coins and bars, but I think everyone else has figured that out now.  Coin dealers are generally sold out of silver, and don't have much gold left either.  When you CAN find silver, like on eBay, it sells at large premiums to the phony spot price.

The quote that opened this entry wasn't spoken this past week by some outraged taxpayer.  Some 90% of Americans were against this bailout, and I am disappointed that both McCain and especially Obama supported it.  The Congressmen who are assured re-election supported the bill.  Fortunately, there were enough Congressmen in tough re-election races that they were afraid of a public backlash in November, and voted it down.  For once they actually listened to their constituents.

So where did that quote come from?  Abraham Lincoln said it in a speech to the Illinois legislature in 1837.  The more things change, the more they remain the same.

For those who enjoyed seeing Hitler lose his shirt in the market, he managed to raise another stake and try again.  For another look at You-know-who's problems in the stock market, visit:

 http://www.youtube.com/watch?v=WfvIstgOugc

 

When in doubt, win the war!

I have been remiss from writing this blog, but I have a good excuse.  I have put the time to good use, and finished revising my third novel, which I call "When in Doubt, Win the War."  I shipped the manuscript to the publisher this week, and I will still have to review the galley proofs, but it is finally finished.  Only took me four years, too.  But in my defense, life kind of got in the way for a couple of those years.

Anyway, I meant to get back to writing about the economy, but so much has happened that I don't know where to start.  We are in the middle of a credit crunch that has knocked the stuffing out of silver, gold, and the related mining stocks.  Oil has gone down as well, but that was because of me.  I organized a one-man boycott and did not buy any gasoline in June, July, or August.  You can do stuff like that when you're retired.  The resulting demand destruction caused the oil price to collapse from near 150 to less than 100.

However, we are still in the midst of a secular bull market in commodities, and it is only government intervention on a scale the old Soviet Politburo would have been proud of that is restraining asset values.  The distortions in the market have become so blatant that even Hitler is angry about it.  Really, he is.  Just watch this video:

http://www.youtube.com/watch?v=eVB-SSkkLnY

That's what you get when you use margin.  Ol' Adolf didn't know that der trend iss your friend!  If only he had been able to hold on for a few more days, gold went up $85 on Wednesday.  Such are the fortunes of war.  Speaking of war, the lesson to be learned in times like these is that the time to buy is now, when there is blood in the streets.  Here is a lesson from history.

In 211 BC, Rome was at war with its ancient enemy, Carthage.  The great Carthaginian general Hannibal had already defeated the Romans in battle several times, and had slaughtered their armies.  In 211 he marched his army to the gates of Rome itself, throwing the city into a panic.  As luck would have it, the land outside the city happened to be up for sale.

Someone bought the property despite the fact that it was encumbered by having the entire Carthginian army camped on it.  The buyer must have been confident that Rome would eventually drive off the enemy.  And in the end, the Romans would sack Carthage, burn the city to the ground, and then dump salt in the earth so that nothing would ever grow there again.  The Romans took their wars seriously; no Marshall Plans for them.

But my point is that when things look bleak, that is the time to buy, not sell, as Fortune favors the bold.