Friday, October 10, 2008

RAIN - 25 Days to E-Day

RAIN Minus 25

Item First – Let it RAIN: From now until the presidential Election Day we will begin each post with a review of the Remove All Incumbents Now (RAIN) campaign. A good rain washes clean all the road scum, dust and filth. We hope that a cleansing of Congress will result in the firing of the legislators who are part of the group that bailed out Wall Street with nearly a trillion dollars, at least 150 billion of which was blatant authorized pork by Democrats to appease Republicans who had previously rejected the bill then changed their vote allowing it to pass after being seduced by pork. We are not sure how much of the bailout, if any, was actually needed.

It’s the economy, stupid: Some have declared the economy to be in free fall. Well it isn’t free for millions of Americans who have been seduced into buying stock over the years. Remember the good old days? Passbook savings, certificates of deposit (CDs), money markets and other interest-bearing instruments? What did they all have in common? They all guaranteed a return. What else did they have in common? Since they were guaranteed, they produced modest returns but the Wall Street stock market pimps figured out that if they developed an advertising campaign that targeted all those savings account owners, they could sell more stock. The plan was as simple as snake oil sales. Feed on the greed. Tell people they were better than a measly x percent return. They could invest in the stock market and make millions. And the masses listened to the propaganda and invested. First it was so called dot-com stocks. We really didn’t understand this computer revolution but hey, why can’t we make money like all those geeks at the dot coms? So we invested.

A bust is something other than a statue head: The dot-com revolution made millionaires out of pimply face kids. So we invested and the bubble got bigger and bigger and bigger and BOOM! All those multi millionaires became thousandaires then hundredaires then $ 10.00 per hour geek computer repairers. We didn’t learn. Savings accounts are for saps. The real money can be made in real estate and yes, stocks. The dot-com bust was a freak of economics. It would never happen again. Flip that house. Buy those stocks. Washington will even help you be removing all those pesky rules and regulations from the market and from the banking industry making it easier for you to buy stocks. As for real estate, no market was hotter than the Las Vegas market. As soon as a new models were opened in developments people bought a house that wasn’t even built yet. Within a month, with the house under construction, the buyer-speculator sold to another buyer-speculator, often with a profit of $ 100,000 or more. Homes were sold with zero down at 120% of the purchase price. To qualify no documentation was required, just say you could qualify and get the loan – they were called liar’s loans in the industry. Then the house of cards came tumbling down and dragged with it not only the housing market but the stock market and every other business that depends on credit.

My mother was so out of touch: My parents were born early in the twentieth century. In fact, my father’s birthday was an easy one to remember, 12/13/14. My mother was born the following August. Both were children of immigrants struggling to make ends meet and as teens lived through the Great Depression when some of the same problems created some of the same problems we see today. Mom managed the household money and was cutting edge enough to trust banks, unlike many of her peers. But she neither parent understood nor trusted the stock market. Every extra penny she could scrape up went into saving accounts, CDs, money markets and other instruments with fixed returns. She even kept a stash of cash hidden in the bedroom “just for emergencies.” Her four college-educated kids often teased her about being old fashioned and not making more from her investments but Mom would not budge. And when she passed away a few years ago in her 91st year she left a fiscal legacy that stunned all her children. They lived frugally, invested conservatively, and saved for the next generation. The same story can be heard over and over among baby boomers that have taken inheritances and plowed them into real estate and the stock market. Our parents were not the fiscal old fools we accused them of being when they refused to learn about stock market investing.

The plan from this point forward: In times such as these we look to our leaders to provide direction. A hotly contested presidential race has the economy as its center point with each candidate promising to have the cure all. The lame duck president, who no doubt will be glad to leave Washington albeit with his tail between his legs, spoke to the American people 14 times in the past 16 days including today, but his speech simply increased the anxiety of many Americans as the stock market continues to fall. Investors are pulling their money out of stock mutual funds making this week the worst in the 112 year history of the stock market. The president’s approval rating among Americans is at a meager 24% but if the diehard block of party members is taken out of the mix that approval rating sinks to single digits.

The responsibility provides enough blame to go around: Who is responsible for the current economic mess? The investment bankers who gave the easy loans, the lenders who made the loans to unqualified people, the appraisers who overvalued houses which encouraged homeowners to “bet on the come” and buy homes they really could not afford, and of course the politicians who deregulated the industry which allowed many to prosper and those in the business to live high off the hog. We have little power to make any changes among any of the above groups save the legislators who took money from PACS and legislators and stripped regulations from the banking industry. Democrats blame Republicans, Republicans say it started during the Clinton administration. It matters not whether one party is more culpable than the other, all incumbents are guilty. We have the power to throw the bums out.

RAIN storms are on the horizon: The RAIN (Remove All Incumbents Now) campaign asks you to not be tricked by a political party that tries to seduce you to vote for its candidate. Vote for the presidential candidate you believe will do the least harm. Then vote AGAINST every incumbent on the ballot. That will be the strongest message the American public can send to congress. It might not cure cronyism and abuse, but it will cripple the corrupt system as it now exists.

A little blogging music Maestro... “November Rain” by Guns ‘n Roses.

Dr. Forgot

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