So Let's Say the Bailout Passes
10-02-2008, 10:40 AM
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So Let's Say the Bailout Passes
I believe the concensus is that the bailout is going to pass tomorrow, with the slim margin it lost by a few days ago, I think there are going to be enough representatives who will change their minds this go around.
With finite resources, we want to capitalize on the best stocks and who will be helped most. I am going to bet the bill passes, thus I will invest at the lower levels seen prior to the vote.
With that being said, lets talk about who we should be betting on and maybe a little of the why...
First and OBVIOUSLY foremost, the financials, but what companies in particular will see the biggest jumps. To this I think we need to look at those more on the brink, than those who have proved more solid over the past few months.
Take for example, BAC, the stock is almost back into the 40's. A solid bet in any case and certainly a stock worth owning for the long term with a great dividend. They won't see a huge jump, but the gains should be impressive.
C - Their stock continues to trade in the low 20's, I could see a larger percentage jump here, but am not sure owning this for the long haul is in my interest...
Of course, we have to mention AAPL, I think we should see a nice jump there tomorrow too.
One more...POT...a huge drop today, probably followed by some recovery tomorrow, probably a pretty safe bet even though not directly linked to the bailout.
Your thoughts?
With finite resources, we want to capitalize on the best stocks and who will be helped most. I am going to bet the bill passes, thus I will invest at the lower levels seen prior to the vote.
With that being said, lets talk about who we should be betting on and maybe a little of the why...
First and OBVIOUSLY foremost, the financials, but what companies in particular will see the biggest jumps. To this I think we need to look at those more on the brink, than those who have proved more solid over the past few months.
Take for example, BAC, the stock is almost back into the 40's. A solid bet in any case and certainly a stock worth owning for the long term with a great dividend. They won't see a huge jump, but the gains should be impressive.
C - Their stock continues to trade in the low 20's, I could see a larger percentage jump here, but am not sure owning this for the long haul is in my interest...
Of course, we have to mention AAPL, I think we should see a nice jump there tomorrow too.
One more...POT...a huge drop today, probably followed by some recovery tomorrow, probably a pretty safe bet even though not directly linked to the bailout.
Your thoughts?
10-02-2008, 11:22 AM
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10-02-2008, 11:40 AM
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I think even if the bailout passes, you will still see a sell-on-the-news selloff. But if it fails to pass, the immediate selloff will be worse. Much, much worse.
Andrew
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10-02-2008, 01:48 PM
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The urgency for passing this bailout bill is based on the claim that the American economy will collapse if nothing is done. If the government were to stay out, and allow the market to function, there will certainly be a great deal of economic pain. Companies will go bankrupt, banks will fail, real estate and stock prices will keep falling, and many people will lose their jobs. However, government action will not prevent any of this. At best, it will merely delay the inevitable, but only at the cost of increasing the severity of the underlying problems, thus making their ultimate resolution that much more painful to endure.
The bottom line is that there is no way to resolve our economic problems without a severe recession, and our politicians need to level with the public. As a nation, we gambled on the alluring riches of real estate and we lost. The price must be paid. Contrary to the Bush Administration rhetoric, the fundamentals of our economy are not sound. If they were, we would not be in this mess. Recessions are meant to restore balance, purge excess, and liquidate mal-investments. On that score we have a lot of work to do.
We are being told that this plan will help the economy by keeping the spigots of consumer credit flowing. However, to really address the fundamental problems, those spigots must be tightened. Since we have already borrowed and spent ourselves into bankruptcy, the last thing we need is for consumers to borrow more.
Our leaders maintain that without this bailout consumers will not be able to borrow money to buy cars. So what is wrong with that? We already have plenty of cars, and if we are broke, why do we need to buy more? Instead, we need drive our old cars longer, pay off our underwater auto loans, and produce more cars for export. It is also argued that without access to credit parents will not be able to borrow money to send their kids to school. That's fine by me as it will force Universities to reduce tuitions to levels families can actually afford. They will either have to cut out all of that bureaucratic fat, or go out of business for lack of customers.
In the end it is impossible for the American economy to be rebuilt on a sounder foundation of savings and production without a lot of economic pain. Government efforts to reinforce the shaky foundation of borrowing and consuming will result in the entire structure falling down around us.
The bottom line is that there is no way to resolve our economic problems without a severe recession, and our politicians need to level with the public. As a nation, we gambled on the alluring riches of real estate and we lost. The price must be paid. Contrary to the Bush Administration rhetoric, the fundamentals of our economy are not sound. If they were, we would not be in this mess. Recessions are meant to restore balance, purge excess, and liquidate mal-investments. On that score we have a lot of work to do.
We are being told that this plan will help the economy by keeping the spigots of consumer credit flowing. However, to really address the fundamental problems, those spigots must be tightened. Since we have already borrowed and spent ourselves into bankruptcy, the last thing we need is for consumers to borrow more.
Our leaders maintain that without this bailout consumers will not be able to borrow money to buy cars. So what is wrong with that? We already have plenty of cars, and if we are broke, why do we need to buy more? Instead, we need drive our old cars longer, pay off our underwater auto loans, and produce more cars for export. It is also argued that without access to credit parents will not be able to borrow money to send their kids to school. That's fine by me as it will force Universities to reduce tuitions to levels families can actually afford. They will either have to cut out all of that bureaucratic fat, or go out of business for lack of customers.
In the end it is impossible for the American economy to be rebuilt on a sounder foundation of savings and production without a lot of economic pain. Government efforts to reinforce the shaky foundation of borrowing and consuming will result in the entire structure falling down around us.
10-02-2008, 03:03 PM
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BAC is sure winner. The bailout, if it passes, will remove ANY doubt about the Countrywide acquisition. It'll transform that from "WTF did they do?" to "absolute genius!" I have no idea if stock prices will pop right after the vote but my magic 8-ball says the long term outlook would be great for them.
10-03-2008, 10:00 AM
#7
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The bailout means nothing. It's just a drop in the bucket. All it means is that the banks have extorted all the money from the government they are going to get and will just deal with it from here out. Any recovery will be slow and gradual. The market however should calm down a bit now that all the cards have been played.
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