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Bailout debate: Who will score the big gains?

Today's Financial News - Posted September 24, 2008

Wall Street is waiting for news from Washington before it makes its next move. Most Americans admit a bailout is necessary, but where the money should come from is creating diverging arguments. One thing is for sure, investors will have a great chance to make money.

By Andrew Snyder

Baltimore – (TFN): I made the mistake of going to a political debate on a college campus last night. I knew it was going to be a disaster the second I walked out of the parking garage.

“Hey man, are you a professor here,” one confused young man that was obviously a freshman asked me.

Maybe it was my “maturing” hairline that gave him the impression. Or maybe it was my seasoned good looks. Whatever it was, this kid knew I did not belong next to his frat house.

Still, his question did not make me happy. It was not that long ago when I was strutting around campus making fun of old guys.

The night got worse the closer I got to the auditorium hosting the debate. It turns out colleges really are breeding grounds for new liberals.

No matter where I looked, Obama supporters ruled the sidewalk. There were posters, t-shirts, and banners all over the place. It was obvious, I was well into uncharted territory.

McCain had just one tiny faction. I am guessing these were the economics or business majors. They did not look like they fit in either. I could tell I found my brethren. As I walked by, I nodded and kept moving.

A fight worth fighting

Inside the auditorium, the debate had already begun. No big-name politicians were there, just a few local radio pundits and a school-board member wanting to be a state representative. Still, the debate was raging. It was tough to keep my mouth shut.

Of course, the Wall Street bailout was the leading subject. Almost everybody in the room agreed relief was desperately needed. Where the crowd diverged was in deciding who was going to pay for it all and how much relief was needed. The opinions were all over the place.

Interestingly, party affiliations did not have much impact on who was fighting for what. Democrats admitted tax increases are not the answer. And Republicans argued tax cuts would destroy us. So what’s the answer?

Really, everybody in the room already new the answer. The government needs to borrow huge sums of money to bail out Wall Street. That means it will issue more bonds, dilute the dollar even further, and put even more of the nation’s debt in the hands of countries that are not real fond of us.

This is not a good long-term solution to any of our problems and is nothing more than putting a band-aid on a horrific, mortifying wound.  Eventually, our trillion-at-a-time borrowing habit will be the addiction that pulls this country down.

For investors, it is both good and bad news. The bad news is America may have already reached its peak of power and is entering a permanent downfall. The good news is the downfall will take a long, long time, creating lots of profit opportunities along the way.

Gainful insight

Right now, equity evaluations are drastically lower than they were just a year ago. I have no doubt they will be climbing again soon. Even better, many foreign countries are benefiting from our current crisis, opening up a slew of investment opportunities.

Already this week, investors have had a lot of great opportunities tossed in front of them, from playing the constant fluctuations in the financial sector to shorting some of the nation’s larger retailers and manufacturers.

The opportunity to make money remains. And as long as the markets are moving (which they most certainly are) there are profits to be made.

America may not be the financial powerhouse it once was. But if that power was built on a house of cards that depends on huge amounts of leverage, we will be better off after it collapses.

This is a critical time for the country and its financial markets. It is also a fantastic time to be an investor. Opportunities are all around us.


Next Article: Earnings updates: General Electric (GE) lowers forecast

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Posted by Andrew Snyder · Filed Under US Stocks and Markets 

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