The Fed hired who?
Today's Financial News - Posted November 4, 2008
The government is still up to its old tricks of hiring within the inner circle and frivolously spending huge sums of money. But at least this time, companies like General Electric (NYSE:GE) and Wells Fargo (NYSE:WFC) have a shot at some big money.
By Andrew Snyder
Baltimore – (TFN): With a resume like that, this guy is bound to wind up working for the American government. In one of the latest what-were-you-thinking moves, the Federal Reserve just announced it has hired Michael Alix as a bank regulation advisor.
Who the heck is Michael Alix, you ask? He is the former chief risk officer at Bear Sterns, a company that thought risk-management was an oxymoron. Essentially, he is the guy that allowed Bear Sterns to get so over-leveraged, it collapsed under its own weight.
Now, he is an advisor for the Federal Reserve. At the very least, he can tell us what not to do.
Frankly, I believe the Fed’s hiring of one of the executives at the center of today’s market fiasco proves that the “good-old boy” system remains alive and well in Washington. It is a disgrace.
But as investors, there is little we can do about the Federal Reserve’s hiring policies.
What we can do, is take advantage of the money they are throwing towards us.
Virtual free-for-all
With $700 billion on the table, all sorts of companies are looking to get their hands on some cheap money. The way I figure it, every company that made the SEC’s recent no-short list has a shot at the bailout funds.
That means companies like General Electric (NYSE:GE) and Wachovia (NYSE:WFC) have a chance at a significant shot in the arm over the next few weeks as checks are written and put in the mail.
A lot of companies need the money. Some of them will use it just to keep in business. And others will take it and still manage to fail. But a handful of the best-managed companies will use the money as a springboard to larger profits down the road.
General Electric will be one of these companies.
Officials recently told us if bailout money was offered to GE, it would seriously consider taking it. Essentially, that is press-release code for, “Give us some money please.”
Fortunately, General Electric does not need the money to survive. It does, however, need the money to create lots of new jobs and get back to the double-digit growth rate investors are accustomed to. That is why the government will be willing to write the behemoth conglomerate a sizeable check.
General Electric is not the only company that will benefit. There are dozens of companies that are drooling over the handout opportunity that do not necessarily need extra capital to survive, but will take it in an effort to get the economy soaring once again.
Investors that take advantage of these artificial cash flows will profit handsomely. I already recommended buying shares of GE last week and readers that followed my advice are up by more than 15%.
There will be more companies like GE, so keep an eye on the markets and stay tuned to this site. I will let you know the moment I see another profit opportunity arise.
Next Article: Democrats and the oil industry
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