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Posted by Elle on January 14, 2008, 12:31 pm
> "Elle" wrote:
>
>> I think the government is smarter today and we will not
>> have
>> a depression, but I am seeing a year or more of
>> recession.
>
> What do you think the government can do in this situation?
On the premise that a response may help U.S. investors
understand the pros and cons of investing in U.S. based
stocks, bonds, CDs etc., and so plan, here is a brief
response, designed for casual chatter and nothing more:
Controls on money supply: Alter interest rates and taxes
(individual, corporate, import etc.); set tighter or looser
controls on lending standards and amounts banks must
maintain "in reserve." Etc. One recent interesting example
in this vein involves the government (if need be) granting
an exception to Bank of America so it can buy Countrywide
Financial. Without this exception, BAC would be in violation
of a law that says no single bank yada can hold more than
10% of the country's money deposits.
Controls on stock markets: The stock market is abruptly and
automatically shut down (to give investors a chance to come
to their senses, say, in an irrationally-based panic) when
certain types of declines take place.
Controls on jobs and products: Nationalize certain
industries to ensure commerce flows as freely as possible,
promote creation of more jobs; prevent price gouging;
require lenders to make special allowances for those facing
foreclosure; etc.
Controls on foreign policy: War or no war.
Econ is not an exact science, of course, and naturally there
is no precise answer. I do think it's important to
understand that changing the "financial health of a society"
requires taking a long view. It's a collection of actions
that over time (sometimes several years or more) causes
change. Never expect immediate correction of a situation
like that we are in today, with poorer people losing their
homes and wealthier people seeing their investments take
huge hits.
One has to consider the means by which cultural change is
effected (sic). It's social science, which is as inexact or
synonymous with economics.
I think folks who are most interested in improving their own
lot have to look out for the good of society as a whole.
Government is supposed to look out for society as a whole,
but it helps if the populace "gets" that the reason for
doing so is not for lame-assed, "fuzzy feel good" results.
Rather doing so is a matter of sound financial reasoning.
See for example Safeway CEO Steve Burd's commentary on how
"investing" in the physical health of his employees via XYZ
has improved Safeway's financial health. What is good for
all does help the economy profoundly, meaning more are more
likely to be innovating in business, earnings are up, folks
have jobs so you and I can have growing dividends from
growing company earnings, the human condition (longer life
expectancy yada) improves via technological improvements
etc.
Note: My thoughts are influenced via early study at the feet
of a student of Nobel prize winning economist Paul
Samuelson. He being something like an early (the earliest?)
composition of Ben Graham, Warren Buffett, Alan Greenspan
(hmm, to those in the know), Jeremy Siegel, Robert Shiller,
and others who are regularly highly regarded.
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Posted by pallav on January 13, 2008, 7:40 am
Alternatively, you may also want to look at Wachovia (WB) which is
trading at very attractive levels. Good dividend too. The company has
said the dividend is safe but we will have to see. I own a little bit
of them.
Rather than getting individual bank stocks, you might also want to
consider Ultrashor Pro Financials (UYG) a leveraged ETF that has
tanked this year. It might be an excellent investment for the long
term. I don't own any.
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Posted by rick++ on January 14, 2008, 11:10 am
If you are investing in a bank-manged security,
they have to tell in the perspectus.
Otherwise you only learn about it if it goes bad
and the bank has to explain it in their annual
profit nd loss report.
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