Sunday, March 1, 2009

Maybe If We Keep Throwing Money At The Problem... Then...

There's a common phrase among investors/traders and overall, in the general business sense- that is: "Don't Throw Good Money After Bad Money."

One of the main reasons I believe that we're in for more lows in the markets is due to the fear that it will create in the general public. Fear causes panic, and panic can lead to irrational decisions. I believe that's the exact play the Obama administration is aiming for. For those who still wonder about how our representatives passed the initial $700B bailout in the face of strong opposition by the majority of the public, the answer is simple: (1) they scared the majority of you into believing it was necessary in order to prevent a collapse of the financial system, and (2) they are being paid to do so. Don't be so naive into thinking that people who donate thousands/millions to political campaigns don't expect something in return. Yes, this goes for Obama as well, despite his false claim that he does not take money from lobbyists (perhaps not directly, but in directly, it comes his way). Is there really any other rational explanation for this?

Although I'm no business major, it seems pretty reasonable to not put more money into a company that is obviously failing to correct its mistakes. Sure, maybe give them one shot to make it right, but with companies (such as the automakers) that have continually failed to move their R&D in the right direction, they should not be given a lifeline. For all you people (mainly the left-side) who apparently despise the rich getting richer, these bailouts are in fact, lining the pockets of the rich. The wealth that was created by these few rich people, built upon a mountain of lies (Madoff and many others) and deception (falsifying financial statements), is remaining in their pockets. Why? Because our president and our congress is choosing to reward them for doing wrong. We are saying to these robber barons, "Cheat? Lie? Ok, because you guys are "too big to fail," we must save you, at the expense of everyone else."

The scare tactics by Obama, such as describing the financial bailouts as neccessary in order to "prevent a crisis from turning into a catastrophe," are a slap in the face to the average American. I know a lot of people that voted for Obama honestly believe every word he says, but take a step back off your partisan platform, and look objectively. Each time some sort of "stimulus" or "bailout" has been passed since late last summer, the markets have corrected downwards. The mess we are can be blamed on both Republicans and Democrats. During the first bailout, I specifically urged others to vote out incumbents who voted for the $700B bailout package, regardless of party. Those who still think this is a partisan battle are pitifully misinformed. The quicker that we as a nation agree that this is actually a battle between these robber baron elites, and the rest of Americans, we can begin to talk about the road towards recovery.

Until then, I look forward to profiting the most from the declines in the markets, and perhaps be a little better off in the future changed America.

A brief quote from Tim Knight, whose blog I frequent, and recommend to other traders for daily trading ideas and general commentary on the markets, describing the change from a capitalist America, towards the new socialist America:

The pendulum has just started to swing the other way, and I don't think it's a little bobble before we return to the above. I seriously think we are in for just as long as period - - and just as deep a change - - as the era above. We'll be stumbling our way back to where things were in the late 1970s..........malaise, weakness, and Billy Beer.

What would people think if, just six months ago, you speculated that Citigroup would be a nationalized institution? Would they laugh at you? Look at you as if you were insane? Cart you off to a rubber room?

That, of course, is just the tip of the iceberg. When Obama speaks of a "once-in-a-generation opportunity" to change the government, he isn't talking about remodeling the oval office. The "opportunity" is the most dramatic expansion of the government and its intrusions than any of us have seen in our lifetimes.

I have no doubt that Obama, with an almost filibuster-proof Democratically controlled congress, will change the landscape of America in a way in which, as TK says, "we can scarcely imagine today." The change will come, but I'm not sure everyone who vouched for Obama realize that the change that comes will be much more than they bargained for.