Been offline and now i'm in a hurry so I haven't the proper time to prep a rant against the bailout. Here's a few tips, though:
- If you have more than $80k combined at any one bank, move some of it into a new account at a different bank or into some other kind of investment. Immediately. Like, as soon as you read this. FDIC only ensures each individual up to $100k per bank.
- This is not a good time to be all in to any one thing. Are all your 401k/403b $$ in a single stock index fund? Best to move some over to treasuries. Are all your stock holdings are in one company? Think about the folks who held only AIG, or only Lehman Bros. Don't be like them.
- Looking for a stock to hold? I like Southwest Airlines because (a) I use their product all the time and (b) they've held up better financially than their peers and stand to gain as the others suffer some more. I also like Costco, since their business caters to people trying to save a few bucks, and that's pretty much all of us just now. They're also Apparently Not Evil. These two companies haven't paid off overwhelmingly in the time I've held them, but they've held up, and I hope that continues.
- Everbank's foreign currency-backed accounts look pretty interesting. If I had too much cash in one place (not even close!) I'd probably move some into one of their currency index CDs.
- I own one stock that I expect to go up (it's been going up steadily in the past weeks): BRK.B. It's not like I own very much of it - I'm a librarian, after all - but I've been steadily moving toward it for the past few years and it just keeps paying off. Check the headlines for clear signals that that's not going to change.
I don't like this bailout one bit. I haven't read the senate markup that passed tonight but the house bill was terrible. It doesn't address the key issues, it doesn't provide much potential benefit for the risk, and it's being crammed through like so many pre-emptive wars. *Nobody* I've listened to or read in the past few weeks who knows the history of bank panics, depressions, and credit crises seems to think this plan does anything to help people like you and me, and I'm inclined to agree.
I'm also inclined to never vote for anybody who supports it. Unless something changed drastically in the senate's approved version, this is a horrible, horrible mistake we'll all be paying for for a long time.
in re: foreign currency
See also foreign-currency-backed mutual funds MERKX ("hard currency fund") and MEAFX ("Asian currency fund"), which (having just sold a house without buying a replacement) captured my attention for similar reasons.
On the other hand I am possibly the world's least effective investor, so if I zig you should zag.
The Senate version
So, the Senate did tack on a bunch of stuff including provisions for (well, against) golden parachutes, an increase in the FDIC (to which I ask where, oh where, are we getting the funds to back such an increase?), and ... other stuff I don't remember because maybe, just maybe, I was imbibing something containing alcohol last evening and am otherwise sleep-deprived.
Sen. Schumer calls the additions "THO:" for Taxpayers, Homeowners, and Oversight. You probably want that unpacked more considering the combination of
1) your inclination not to vote for any supporters of the bailout and
2) the fact that both major party Presidential candidates supported this bill
pretty much entail you're voting Nader or McKinney or Mickey Mouse in a month.
Incidentally, I find Donald Duck's platform much more compelling.
No one *likes* the bailout, but...
I agree with much of your advice:
As for the bailout, the person who's primarily responsible for the success of the company you've been investing in lately, Warren Buffett of Berkshire Hathaway (BRK.A and BRK.B), is in favor of it. I don't think anyone questions how much he knows about the "history of bank panics, depressions, and credit crises." And, while he's extraordinarily wealthy, he's also universally renowned for his ethics, he does not live like a rich person, and he gave away just about all of his money (to the Gates Foundation). FWIW, he also backed both Obama and Clinton in the Democratic primary: he just wanted one of them to win.
Paul Krugman, who also knows a pretty fair amount about economic history, is in favor of a bailout.
I'm not saying it's a good plan, or even that I'm in favor of it. The numbers are too large for me to comprehend, and my mind reels at the potential unintended consequences of foolish action or foolish inaction. My only point is that reasonable, honorable, knowledgeable people think this bailout is worth doing. We should listen to them as well.
Appeals to authority
You make good points, Brett, especially in your final paragraph. However, you are cherry-picking your appeals to authority.
There is nothing resembling consensus among economists. There is so little agreement, in fact, that I am automatically skeptical, and perhaps distrustul, of any special claims to knowledge about the impact of the bailout or the fundamental functions of the economy (which is so complex as to mystify even so-called experts).
I applaud Dan for taking a principled stand on the bailout issue and for encouraging this discussion.
not to hijack the thread, but...
Dan,
Shoot me an email - we have some catching up to do.
-Chris
That is all.
Which Chris are you? I
Which Chris are you? I can't guess. Email me first, couldya?
Hint:
We co-wrote the epic 1991 song "Now and Forever." Too bad I can't find the masters for that thing :-(
What's your email... I'm probably an idiot, but I couldn't find it here.
No way! Holy moly, it's
No way! Holy moly, it's good to hear from you. Email me at this username at umich. (Same address I had back then. :)
Can't wait to hear more about where you are and what you've been up to.
A friendly amendment to your post
Dan, I agree with most of your comments, but I think we all need to vote for Obama despite his having voted for the bailout. We just cannot allow four more years like the last eight.
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