Friday, October 3, 2008

Thank Goodness!

Today marks a milestone not seen since the elections of 2006:  the Congress of the United States  temporarily stopped their partisan rancor and childish bickering long enough to actually get done what was required for the good of the Nation.  Hooray!

After Monday's failure to pass the Emergency Economic Stabilization Act of 2008, our legislators watched the markets erase $1.2 Trillion in wealth, the credit markets begin to tighten further, foreign governments and central banks pleading for American action, and small and large businesses throughout America begging for help.  The Commercial Paper market, the way firms borrow short term without having to float bonds or issue new stock, had doubled interest rates on those notes within two days.  A real wolf was at the door.

The legislator with the best name in Congress, Zach Wamp, Republican of Tennessee, said that he had "voted with his heart against the bill on Monday."  Today, Congressman Wamp made the decision to vote with his brain.  33 Democrats and 24 other Republicans who had opposed the bill on Monday today joined Representative Wamp in becoming "brainiacs."  What a pleasant change...

The President signed the bill this afternoon and SECTREAS Paulson promised to start immediately to implement the purchase and removal from the credit markets the toxic sub-prime mortgage securities as the law now requires.  This will happen over the next several months, not the next several days, so we must not expect that the disaster which has been building since 1977 will be swept away in the blink of an eye.

Several alarming things I have learned in this crisis.  First is that the children of the United States are no longer required to take a Civics Class in high school.  I learned this on the golf course, playing with a kid from the local school.  Now, Civics was not my favorite class in school, but at least I was once exposed to the mechanics of how a bill becomes a law. My golf partner had no clue.  Today's kids apparently only know what arrives as a text message on their phones...

Second thing I learned, to my dismay, is that a Congresscritter, once having voted with his/her electronic card and with the vote closed and the results announced, may then ask his/her party whip in the House to CHANGE THEIR VOTE for the record, as long as it does not change the outcome of the overall vote.  So those 58 brave Members of Congress who decided to vote their brains instead of their heart today, may well go home tonight and tell their constituents that they remained true to their heartfelt principles throughout the week.  

If there was a way for me to discover that my representative had voted one way and then said they didn't, that would seem to me to be an impeachable offense.  But, alas, those minor details are not public in accordance with House policy.

I hope some of you took the opportunity I mentioned in an earlier post to add to your financial portfolios during the Wall Street fire sale this week.  I think I said you needed to act NLT early Thursday, but I didn't explain why.  Wall Street has long embraced the mantra, "Buy on the rumor, sell on the news."  The markets went up on Wednesday and Thursday as buyers were reacting to the Senate's action and rumors that the House was coming around.  Today, when the House passed the bill (the news), the markets dropped off slightly as sellers took control.

I added Goldman Sachs and Apple to my portfolio this week at prices less than half of what they were several months ago.  There are still some bargains left after today's slight drop, but if you want to take advantage, I wouldn't wait much past early Monday.  

Normally, I am very much opposed to market timing as a strategy.  In this instance, I simply see a "bottom fishing" opportunity which I think will be fleeting.

Well, the storm clouds will clear over time and we have apparently dodged this bullet.  Now, let's take the time to relook how we got to this mess, so that "Wall Street Greed" is not seen as the only villain.  It seems to me that there is plenty of "Vote Buying Greed" that deserves equal billing.

Thanks for your many positive comments on my attempts to cut through the fog of this crisis.


Anonymous said...

Your blogs have been very helpeful on all this mess. Thanks so much. To bad our Congress could not put out a bill without adding a lot of pork barrel even to this one. This was the one bill that should have come out clean but alas as we know that would never happen. Hopefully the right thing has been done for the country. Your remarks have been taken well and passed on to the big brother that dabbles in the stocks. Thanks.

Apis Melliflora said...

Wish the bill weren't so bloated, but happy something passed relatively quickly.

Like the cartoon too!

Pinspot said...

I finally had some time to sit down and read your last few posts. Well done! I feel smart and informed again!