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Archive for October, 2008

Preparation Not Panic is the Answer to the Troubled Economic Times Ahead

NEW YORK (CNN) — Despite the best efforts of our politicians to convince us otherwise, there is no easy way out of the financial crisis we’ve created.

Gimmicks and Band-Aids won’t solve the underlying problem; they just delay its impact until after the election. While that might help politicians keep their jobs, it won’t help you and me keep ours.

A lot of us saw what was coming before the dam broke. We didn’t need fancy graphs or prize-winning economists to warn us. We just used common sense. But now that same common sense is now telling us something else: Every action has an equal and opposite reaction.

We can’t print billions of new dollars and expect there to never be a consequence for it down the road. We can’t unwind a bubble built on historic levels of greed by simply writing a check or passing a law.

Preparation, not panic.

Things could get really bad before they get better. Really, really bad. But you’ll never know what’s coming by watching the Dow every day — it’s a terrible indicator. In fact, the four largest percentage gains in the Dow’s history happened between 1929 and 1933, a period that wasn’t exactly a great time to buy.

The chorus of Billy Joel’s famous song about the Vietnam War still rings true today: We will all go down together.

What we’re experiencing right now are the outer bands of a hurricane with an eye that likely won’t hit us for another year or two. In the meantime, there will be plenty of sunny days, but they’ll just distract us from what’s coming. Stay focused on what your gut tells you is still churning just offshore.

When the eye of the storm finally comes ashore, nothing will be less relevant than whether you’re a registered Democrat or Republican. It didn’t matter during Pearl Harbor, the Cuban Missile Crisis or Oklahoma City, and I certainly don’t remember anyone asking to see a voter ID card before they gave you a hug on 9/11.

If September 11 was the worst day in American history, then September 12 was one of the best. Do you remember what it was like? Lines at blood banks; filled-up churches; neighbors watching out for each other; families sitting around the dinner table and talking to each other.

It was the America we all long for — and we can have it back. But if you’re waiting for another historic crisis to convince you to put the donkeys and elephants aside and reconnect with each other, then open your eyes; we’re in the middle of it.

Fear, Greed, Speculation, and Bargain Hunting Drive Stocks Higher

NEW YORK (AP) — Wall Street stormed back after its worst week ever and staged the biggest single-day stock rally since the Great Depression on Monday, catapulting the Dow Jones industrials to a 936-point gain and finally offering relief from eight consecutive days of stock market carnage.

While no one was saying the worst was over for the staggering financial system or troubled economy, buyers returned to the stock market with gusto, with some saying stocks had been driven down to fire-sale prices.

The surge came as executives from leading banks were summoned by the Bush administration to Washington to work out a plan to get loans, the lifeblood of the economy, moving again. And it followed signals that European governments would put nearly $2 trillion on the line to protect their own banks.

The Dow gained more than 11 percent, its biggest one-day rally since 1933, and by points it shattered the previous record for a one-day gain of 499, during during the waning days of the technology boom in 2000.

The Federal Reserve Takes Unprecedented Steps to Bailout Businesses.

WASHINGTON (AP) – Frantically trying to stop the bleeding on Wall Street, the Federal Reserve took a first-time step Tuesday to get cash directly to businesses and hinted that interest rates could come down soon.

Stocks continued their free fall anyway and hit new five-year lows.The central bank invoked emergency powers to lend money to companies outside the financial sector and buy up mounds of commercial paper, the short-term debt that firms use to pay for everyday expenses like salaries and supplies.

The Fed, which has only loaned money to banks before, made the move as the gravest financial crisis in decades wore on and concern spread around the world.

“The outlook for economic growth has worsened,” Bernanke said. “The heightened financial turmoil that we have experienced of late may well lengthen the period of weak economic performance.”

The gloomy assessment appeared to open the door wider to an interest rate cut on or before the Fed convenes again Oct. 28. The Fed’s key interest rate now stands at 2 percent.

Wall Street turned its back. The Dow Jones industrials lost 508 points, more than 5 percent, to close at 9,447, the lowest since Sept. 30, 2003. The Standard & Poor’s 500, a broader stock index, closed below 1,000 for the first time since that same day.

Dems and Republicans Screwed the Middle Class Good

Last week, the Bush administration proposed a three-page bill to bail out Wall Street to the tune of $700 billion. It died in the U.S. House of Representatives earlier this week.

On Friday, though, the House approved a far bigger, broader, and beefier version of the bill–which has ballooned to a remarkable 442 pages. The vote was 263 to 171, with the bulk of the opposition coming from Republicans. Because the Senate already approved the measure, it immediately went to President Bush, who signed it into law.

The bailout bill also gives the Internal Revenue Service new authority to conduct undercover operations. It would immunize the IRS from a passel of federal laws, including permitting IRS agents to run businesses for an extended sting operation, to open their own personal bank accounts with U.S. tax dollars, and so on. (Think IRS agents posing as accountants or tax preparers and saying, “I’m not sure if that deduction is entirely legal, but it’ll save you $1,000. Want to take it?”) That section had expired as of January 1, 2008, and would now be renewed.

90 Year Old Ohio Woman Attempts Suicide as Sheriffs Attempt to Evict Her

CINCINNATI (Reuters) – A 90-year-old Ohio woman, facing eviction from the home she has lived in for 38 years, shot and wounded herself this week, becoming a grim symbol of the U.S. home mortgage crisis.

Addie Polk was found lying on the floor of her home with what appeared to be a self-inflicted gunshot wound to her shoulder when police came to the home on Wednesday to serve an eviction notice, Akron police spokesman Lt. Rick Edwards said on Friday.

Home foreclosure rates are at record highs in the United States, in many cases because buyers with adjustable interest rates could not keep up with sharp increases in monthly payments. The foreclosure crisis has sparked a wider housing market downturn and is at the heart of the U.S. financial crisis.