It is easy to get overjoyed at the Monday “Bailout Rally” on Wall Street and in markets around the world. To make that kind of recovery in one day is remarkable. What is even more remarkable is the naivety of large numbers of people, especially talking heads, who are suddenly ready to forget last week and the real scope of the mess we are in.
I suppose it is in their nature these poor souls. Television pundits giving an honest thought are as rare as Sahara snow. Unless there is political capital to be made by exposing how bad something really is, they have an overreaching tendency to downplay everything. Including how you and I are being screwed.
By nature I am a historian and not a prophet. On this though I will venture to say that we will look back at 2008 as a disaster on nearly all fronts. Nearly all because the one area that was supposed to be the worst, Iraq, has turned out to be the least newsworthy. Politically and economically though nothing positive can be gleaned from all this. Neither party has given us a serious choice. You will have to hold your nose to vote either way. Economically we have seen the end result of an orgy of leveraged buying and spending for a decade or more. Stock up on rum, you are going to need it.
When someone asked me what stocks they should buy my response was “ATF”. They asked what that was and I said, “Alcohol, Tobacco, and Firearms.” Not the government agency, the manufacturers. They asked why those and I said, “Because they never go out of style, especially not in hard times.”
The markets may rally for a while, though few are predicting full recovery soon. Things have not yet hit main street in the way they might in the near future. Most of us have yet to feel the full brunt of this storm.
The great question remains though, who and how? Who will pay for this and how? And when? Some freakishly out of place souls on business networks have had the wherewithal to ask these questions. The typical response from current and former Treasury and Federal Reserve functionaries is that “we need the bailout, we have to free up credit, we had to do something, we were facing a meltdown”. None of them answers the questions of who will pay for this or when or how. They change the subject.
It appears as though the “fix” to this crisis is of the same nature as the business practices that got us into it. Those are to borrow the money or inflate it to spend now on all the goodies and worry about paying it later or just write it off. It is like asking the man who robbed you to act as your attorney when you sue him.
Anyone with children, or anyone who knows someone young had better take the opportuity now to drill into their heads the concept of living within their means. This does not mean never go in debt. It does mean always having the means to pay off that debt completely and timely. Future generations and those who are still a decade or more from retirement now are going to foot this bill one way or another. Tightening our finances and getting our ship ready for a long nor’easter right now is the best means of getting through this.
von Rum
The Daily Rum 