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Financial news I consider important, with my opinion, which is worth as much as you paid for it.
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Monday, September 29, 2008

What Next?

The bill may have failed today, but it doesn't mean it's dead. It could come back with some sort of twist. See blog entry here:

If the bailout doesn't occur
USA is facing a DEFLATIONary decline. This is similar to what occurred in the last Great Depression. Those with cash get rewarded, those in debt get pinched. Everyone feels effects through business contraction. Hyperinflation may still occur, but much farther out in the cycle.
Safest place to put money is in Federal Bonds. Not for years, but for next 6 months to a year. Cash will be king.

If the bailout does occur
Its difficult, the USA is still facing a DEFLATIONary decline, but could be trumped by hyperinflation. Interest rates rise, energy, food, and cost of living climbs. Wages don't keep up with inflation. Its tough to say how it plays out, since the US could still deflate then inflate.
Safest place to put money is still Federal Bonds, but be quick to flip into Gold, Oil, resources, to keep up with inflation. (Months later)

Either way
In either event, your finances should have long been out of the stock market. If you have only 10-20% loss, I still think best to move to safer investments. If down 50% or more, well, kinda hard to leave the ship. Still probably the best thing to do. In ANY scenario, do yourself a favor, take 25% of your stock investments and convert to federal bonds. In effect ,split the baby. If your investments double up in their losses, you'll be happy you got out. if your investments "make a comeback", you are still "in it to win it". Hedge your bets. Gold and other key indicators should spike hard up in times of panic, and collapse once that fear has passed. No matter what, do NOT act in a panic, that is almost always the WRONG action.

UPDATE:
Blogger Mish dissects whats next in more depth (Oct 3rd 2008)

Other News

FDIC enters into biggest loss sharing deal ever.
Australia and other countries call for the USA to pass the bailout. My Spin: The countries that want the USA to go bananna republic can pitch in and donate, or better yet buy stock in these financial companies.
The Fed pumped 630 Billion dollars into the stock market, as it dropped.
Moodys may downgrade Citibank's debt from AAA
As I previously blogged , India joins other countries to reduce lending to USA. If the bailout does pass, who will buy our 700 Billion debt? And how much more after that?
(image taken from here)

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