Quote of the Day “Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.” —Warren Buffett
They say the economy is tanking. For sure the stock market is, uh, tunk. I’m sanguine about the market’s prospects over the next twenty years, so I don’t let it bother me too much right now that my entire invested life savings would have been better allocated at 85% to a shoe box and 15% to even more wine, woman and song than I blew so much cash on in the first place. But I am getting more and more uneasy about the state of things to come.
It seems no one really understands the problem, least of all those tasked with addressing it, and that is what’s most frightening of all. The bailouts to the financial industry and auto industry are prime examples of problems too complex to appreciate. Most “folks” are against these handouts whether they consider themselves progressive or conservative but I’m not sure that they (we) understand the ramifications of the position. In Washington, the Dems and Bush are pushing the current bailout while the Republicans in Congress are opposing. I’m not sure if the Dems’ approach is wise, but as usual, I hear zero alternatives from the right, only opposition. The big problem with taking sides in this debate is that we cannot see the future, but rather must rely on the predictions of those who have lied to us so consistently for so long that we cannot be sure when they speak truly. This goes for both sides in DC. If the fall of the “Big Three” is allowed to happen and really leads to a million job losses, Richard Shelby and Bob Corker and all the Republicans are going to be ruined. But if Bush, Pelosi and Reid bail out the companies (and Obama come January) only to see them fail later or even fail to thrive soon, they will be finished. Part of me wants this bailout to fail just to see who’s right, for if it passes only the Republicans are covered politically while if it fails both parties are. Part of me wants to see it fail because it is another case of the public absorbing the risk for business while never sharing in the rewards. Part of me wants to see it fail because its another load of debt that will eventually be paid off by higher taxes on all of us. But part of me believes the doomsday scenario of massive job losses and the inevitable spreading and deepening of the recession/depression, possibly even to my very doorstep. That part of me leans toward keeping the Big Three afloat.
Of course the auto bailout is just a small part of the overall problem–remember that the financial industry bailout is a trillion vs 15 billion for the Big Three. The auto bailout they are talking about now is just for petty cash in comparison to the one in September. And that money has not been used as promised, to get banks lending to consumers again. If it were, the Big Three would be in less dire straits. The first bailout was based on lies from the Bush administration and incompetence from the leadership in Congress in believing Paulson et al’s lies and failing to legislate with specific mandates. I could go on and on on this subject but it gives me a headache. Basically, its a mess. And I don’t claim to have a firm understanding of all the threads in the web, much less how they interconnect.
Other than my retirement accounts, I have yet to feel the pinch personally, and I really don’t know anyone who is feeling it yet. I have read that Mississippi’s foreclosure rate is on pace to lead the nation (last no more!), so I guess I’m just insulated for the time being. I do, however, foresee plausible conditions that could really put my family in financial jeopardy. I’m concerned. For that reason I’m saving where I can, putting off big purchases and generally hoarding cash, all the while buying stock on the big drops. Am I approaching it wisely? I honestly don’t know. All I do is stare blankly–at my portfolio once every few days, or at the TV when the news comes on, or at the new million dollar neighborhood construction I see on the way to work every morning. I’m wondering what everyone else is doing, regardless of how they feel about the money being hemorrhaged up in Washington. Vote below on your state of mind and feel free to amplify on your vote in the comments.
Travellinbaen 
At least you weren’t caught in the Ponzi. Can somebody explain inflation to me.
That Ponzi scheme is unbelievable. Big banks, big money victimized. I actually know someone who this happened to in another Ponzi that took down a lot of people and institutions in South Carolina. It’s horrible and the victims really had no way to know what was going on.
I can’t help but wonder how many other schemes are out there and whether it extends to mutual fund companies. It seems our whole financial system is little more than a house of cards.
I voted for the mason jar option.
My vote is for the mason jar in the freezer or a hidden safe or the safety deposit box. I just switched my whole retirement plan out into church bonds which historically have been much safer. But we shall see. I took a sizable hit in the last year. Luckily, I may be young enough to recoup the loss before I retire. Otherwise, I’ll likely be a Walmart Greeter or be working at the public library until I drop dead at a ripe old age. As for spending that was already under control – I’ve long been a money hoarder as you already know and have been hiding my money since I was old enough to know better, probably age 5.
I have a $3692 hospital bill. My insurance refused to pay a penny because it was out of the network. Huh? I’m looking for answers today.
MD, I’m waiting on your vote. I put in choice number 5 just for you.
Sweet, are you questioning the “best” health care system in the history of the world? MD can answer you I’m sure.
On inflation, there is some good news. We may be entering the first period of deflation since the last Depression. It might be a good time to get in to the mason jar manufacturing/distribution biz.
JLM, there is no doubt you will bury us all. And I’m with you on the hoarding strategy. I didn’t even know there was such a thing as church bonds, but that sounds like a good place for cash.
I’d be glad to fill you in on the church bonds sometime. I understand it is not easy to get into but I was lucky. I will also admit I just planted blueberry bushes at the end of my driveway last Friday – it ain’t tomatoes but I will hopefully be eating them in about a year. At least breakfast will be covered and possibly a dessert or two.
My uncle (a bank vice-president no less) used to hide his money in his trophies. We used to go around shaking them and hoping something would fall out. I get it honest.
My frustration is with the irresponsible action of others lenders who made bad loans and knew it, homeowners who had mortgages they knew they could not afford, and Wall Street’s mortage securities. These are the people we are bailing out? Really!? The same people who put us in this psoition! Really!? I know the site is PG, but WTF!? What do I get for being responsible? I get a huge loss in my 401K and higher taxes. Thanks. What do you do stop saving? How can you?
I do not like the government involvement. If companies can not survive, so be it. I would much rather see the government create work programs like FDR rather than hand out cash. At least we can upgrade infrastructure and society benefits. Just giving money to those who have proven to be unethical and corrupt is not my idea of recovery. I also think we will see some CEOs and others doing some jail time soon. I think they should.
TB-nice commentary. I’ve struggled with this as well, and tried to learn more to better understand what the hell is going on…..and it only makes things more confusing. The Big 3 problems are so intricate and interwoven–we can blame in part, Henry Ford, the current and former executives that never had the forsight to realize at some point in time they may have some trouble, Detroit, the crappy products they produce, the unwillingness to change the model for buliding cars, i.e., Toyota, Nissan, etc., the Unions-their salaries and pensions, Al Gore, the psycho global warming alarmist, and many more. I’m sure we can throw the gov’t in there as well. But I, like you, think that the alternative is worse, and we have to give them one last shot.
For an intersting and quick read on global warming, check out COOL IT by Bjorn Lomberg It’s from an economist perspective. and basically says, yes there is global warming….but Kyoto treaty and all that stuff will cost billions for very little reduction in emissions, etc. and more bears die from hunters than from “global warming”–and basically, we should use this money to improve 3rd world conditions, etc. Oh yeh, maybe the best point that he makes–a helluva lot more people die from cold than from heat. sorry for getting off on a tangent–i guess i got away from bailouts.
I voted for the tomatos thing. It is closest to my actual plan. Actually, I plan to raise rabbits and sqiurrels.( Can U raise squirrels even?). Im also buying all the ammo I can, in case they run out. I got a couple of good hunting guns and have become an adequate hunter thanks to BR. I am certified in rope rescue because I think survivalists have to know how to tie a bunch of cool knots and hang and raise stuff in the woods. Also making plans to get some way off piece of land in remote area that nobody else wants. Ought to be cheap. Luckily,my emt training may come in handy finally because i may have a few accidents along the way. I may consider bringing a few people with me. Sweet, you are obviously invited. I’ll be choosing the rest of my openings carefully though. kNelms, you have some work to do if you want to come. (Not impossible, but your a bit behind in my book). I think Im set. Ready for anything!
TB-where do i begin on this subject? i voted that things are fine, but i was torn between that choice and hording cash in a mason jar. I HAVE seen this economy affect people i know….mostly clients who own businesses where, evidently, people who are hording cash have caused sales to dip to the point that these people are feeling it. Personally, i feel nothing of the kind. I made more money than any other year in my working life. My retirement, which is mostly invested in the portfolio of a AAA company, didn’t dip one dime. While i’m unapologetically conservative, i feel that president Bush’s approach to most financial situations (besides cutting taxes) has been to side with the liberals (not progressives…..only a true liberal uses that phrase). His ability to stick to principal when it comes to fighting terrorism seems to fade when it comes to standing up to the Big 3 for example….why don’t they just cut the hell out of auto prices, and sell a sh–pot load of ’em before Christmas? I’d buy one with my hoarded cash. And if the Big 3 execs are willing to cut costs in order to get bailout money, why haven’t they cut costs before they needed the bailout in the first place? These guys are truly numb to reality and don’t deserve to be bailed out (evidenced by their willingness to drive to washington in fuel efficient cars after getting criticized for flying to the first round of hearings). So, I’m with you on seeing what happens….I truly believe that necessity is the mother of invention and that those lost jobs would be absorbed in a relatively short period of time…..some would retire, some would go to work in other industries, some would start their own businesses, some would move to canada, etc.
I guess I’ll have to wait for another thread? to get my answers. “Christmas is run by a giant east coast syndicate” – Lucy
Van Pelt
TB
I voted things are fine (they really aren’t but it was the best option available). I think 5 years from now this will be the best buying opportunity in our lives. But, the next two years will be painful or flat. The bounce back will eventually be big.
On the bailout. Corbin from TN offered a good plan. It was basically a Ch. 11 without being called a ch. 11. Bond holders hit hard, equity holders basically zeroed out, unions and car dealers negotiate new deals, and financing by Uncle Sam. Thus, all the benefits of bankruptcy without the stigma.
I say the above is a “good plan” because that is where we will get to anyway. The current structure will not survive long term with or without a bailout.
I am on board with not having the failure now. If it costs us 30 billion or so to delay the collapse until the housing market, credit market, etc. are in better shape that is probably a good investment. Do otherwise and you risk taking unemployment over 10%. That would be real bad.
So my choices would be:
1. The Corbin Plan (union figured Bush would team with dems long enough to get to new congress and president. thus no go);
2. Bail out (failure to follow in 2-3 years. This will kill the democrats in the next election as they will be blamed for throwing good money after bad. In reality a delay is better than option 3)
3. Let them fail. Ch. 11s get filed soon after Christmas. Market tanks again and unemployment spikes over 10%. Recession deepens and sets back recovery for years. This is not a good option.
TB,
FYI: I voted for the mason jar plan. However, my presently-unoccupied rental houses are seriously impairing my ability to put any funds into mason jars.
Sweet,
The present health care system blows, but it is approximately 56 times better than a government run system. I have a revolutionary health care plan which I will describe in detail one day—-subtle hint for blog topic TB.
sEan, do you really think that I would desire to go off to a remote location with you? Please remove me from your list of potential invitees.
Honestly not a dig at lawyers, but a major problem with DC is there are too many lawyers (in reality probably just people with law degrees who have very little practice practicing law) who have never been a part of a business trying to solve economic/business related problems. True they have advisers but it comes down to what the elected ones in congress can understand and then articulate in a way that no one else can later use against them on either side of the issue.
Electing more people (Dem or Rep) who’s life work is more than being plugged into the political machine would be a good start…who am I kidding…