Word was going around after lunch today that the market took another nosedive and was getting even worse.  As the day ended, Friday drinks were in order, and since most of us had to be back to school for various anniversary celebrations, a short teacher “reflection” meeting at the local bar was appropriate.

When we made it to the libations around 3pm, the market had been down roughly 500 at that point.  We rolled up to the bar ordered a pint of Yuengling (the local pub beer) and watched various pre-game Phillies shows, NFL Live and silent horse racing. 

However, way in the corner of the bar Fox News was blaring live market updates from “Studio B.”  I swear, every time my friend and I took a long swig, the market lurched up tremendously.  By 3:30pm the market had bounced roughly 800 points to +310 on the day! 

It was uncanny: we were being cheered on by the local barflies to keep it up in some twisted market-oriented drinking game, friends were on their blackberries emailing others to check out the market, other folks were basking in a happy shock staring at the numbers in the corner of a remote screen.  To be honest, it was the most fun I’ve had watching the stock market (if ever watching the stock market can be fun). 

Yet, all good things must come to an end.  I had finished my Yuengling and went to Sam Light since I had to be back at work shortly.  Wouldn’t you know it – I jinxed the markets.  They began to fluctuate and drop.  By 4pm, the market dropped to minus 128 for the day.  The cheer was gone, the bills were paid, the tips were laid, and off we went back to the grind.

The moral of the story is:  watch the stock market with friends while drinking; it’s one of the few ways it can be fun nowadays, and certainly takes the edge off.  (FYI– My latest 403b statement has me down 17% below my initial investments…ugh… pass me another beer and make it stop!)

At a joint town hall appearance today in Wisconsin, John McCain and Sarah Palin got a dose of the folk’s frustration, not just with the economy, but with the Republican ticket not stepping up their attacks on an obviously weak and potentially dangerous set of candidates.  One fellow got up and said the following:

“I’m mad.  I’m really mad, and what’s going to surprise you is it’s not the economy. It’s the socialists taking over our country.  [Applause with standing ovation] 

[To the crowd] “Sit down, I’m not done….

“When you have an Obama, Pelosi and the rest of the hooligans up there gonna run this country, we gotta have our head examined.  It’s time that YOU TWO are representing US, and WE are mad, so go get ‘em!”

[Cheers and chants of USA, USA, USA!]

Click the link to see the video.  It’s awesome!  I hope McCain-Palin get the message and McCain really comes out swinging at the last debate this coming Wednesday.

In other election news, some Dems, Libs, and the MSM have been calling Republican attacks on Obama “racist” or “coded”.  In truth those attacks are simply contrasts and important points that should have been discussed 15 months ago.  These charges should not dissuade McCain-Palin from keeping the attacks coming hard.  As it turns out I was reading Mark Steyn today and he had a great line which nails down how I feel about these latest ”racist” charges:

“…’Racist’ is now no more than the cry of a western liberal who can’t stand his illusions being disturbed.”

Bingo. 

Last night, when trying to point out Obama’s voting record on a 2005 energy bill, John McCain referred to The One as “that one.”   Every line is potentially an issue in today’s hyper-charged environment!

To those of us who don’t look at every gesture at these debates under an electron microscope, it seemed harmless enough.  But it did remind me of Grandpa talking to one of his old buddies about some guy who recently irked him about something.  Or Grandpa complaining to a half-asleep Grandma about some jerk on the news.  It was very “old-man” to me, which unfortunately seems to fit McCain’s image.

In school today, one of my students said McCain was potentially being racist because of the line.  I instructed the young skull-full-of-mush that McCain is not a racist and his statement was probably only meant to be a condescending way to underscore Obama’s limited experience. 

I didn’t hear any racism in that phrase and those who were looking for some kind of racist beast to emerge out of the head of the war-hero probably heard what they wanted to hear anyway.  The mantra’s already spreading that if Obama loses, it’s because America’s racist, and riots may even ensue.  Don’t the Libs have such a high opinion of the voters!  Who’s side is using the ”fear” card now?

Yet, it was condescending, but perhaps more because Obama is used to being referred to as “The One” rather than “That One.”  To an ego as large yet fragile as Obama’s, the “that“ in question might really hurt, which probably led strategist David Axelrod to deem the phrase “odd” when asked about it later.

This past Saturday, SNL had a funny and dead-on skit about the bailout bill.  It was staged as a press conference featuring President Bush, Speaker Pelosi, and Rep. Barney Frank, and also featured an appearance by George Soros.  The skit does a very good job at looking at the primary people who caused the mess, from people who really had no business buying homes, to speculators who made fortunes on the market.  Most damning, however, is how the skit pins the whole sub-prime mess on the Democrats:

Bush: W-w-w-w-ait. Wasn’t it my administration that warned about the problem six years ago? And it was the Democrats that refused to listen?!

Pelosi: What? Who told you that? That’s crazy. It was completely the other way around.

Frank: Actually. This time, he’s sort of right.

Pelosi: Shhh! Don’t say anything. He doesn’t know.

The skit was viewable on NBC’s SNL page – until yesterday.  The skit has since been taken down, and now any comments looking for the missing skit are being deleted from the NBC Message Boards. 

This is censorship at its peak.  Why is NBC taking the skit down?  Some are speculating that it is a result of a lawsuit from the yuppie-liberal couple depicted in the skit who made a fortune on sub-prime mortgages, others speculating George Soros.  While both of these may have merit, it is also interesting that the skit disappeared the evening after McCain started talking up the Democrat’s role in the sub-prime crisis.  NBC has been fairly in-the-tank for Obama this year, and if nothing else, this only fuels that narrative.  NBC should re-post the parody for all to see, just as they are highlighting the VP Debate sketch which mocks Sarah Palin’s western accent and colloquialisms.

UPDATE:  Michelle Malkin is reporting that the skit will be back online soon, albeit edited to remove the “They should be shot” line in the sketch.  I happen to agree with this change.  It is in poor taste considering that the people in question were real people and not just parodies.  However, we shall wait and see if that is all that is edited.  I would think that after all the uproar that has ensued, they will make sure that it is the only item removed.

UPDATE II:  NBC is officially in-the-tank for the Democrats.  Besides removing the above-mentioned “They Should be Shot line”, they also removed the line that accuses Rep. Barney Frank of blocking oversight.

The first full day of market trading since the bailout of all bailouts was supposed to staunch the bleeding of the current economic crisis Wall Street decided to vote.  Thusly, the Dow dropped a record one-day total of roughly 800 points before bargain hunters slowed the bleeding to a loss of about 330 by day’s end.  This was only 3.12%, way calmer than the 1987 crash which wiped out 22% of the market… but we’re definitely in position for serious competition. 

By the close of the market today worldwide indices, including all major American stock markets dropped significantly:  the British FTSE dropped 8%, the German DAX was down 7%, the French CAC (no pun intended to our friends in Boston!) was beaten up and the Russian exchange nearly collapsed. 

So much for the psychological impact of the bailout.  The market waited for this plan to come out and was sorely disappointed with it, just like nearly everyone else.  Too bad the electorate seems to be thinking that government is the answer to this problem, especially when government just screwed it up even more.

One bit of good news: a Mom & Pop gas station here in Jersey has gas as low as $2.99 a gallon for Regular, while most other places here are down to about $3.15.

The Senate took the country one step closer to Socialism yesterday by passing the now $824-billion dolleditar bailout package in a 74-25 vote.  In addition to the $700-billion figure proposed by Paulson, the package now contains an extension of the FDIC insurance cap from $100,000 $124 billion in “sweeteners” to help win over congressional votes: 

• A temporary fix to the Alternative Minimum Tax (AMT)
• Disaster aid to those in Texas and Louisiana who were affected by Hurricanes
• Extension of the Renewable-Energy Tax Credits
• Aid for Rural Schools
• Extending the Deductibility of State and Local Taxes in states that do not have an income tax
• A tax break for certain wooden arrows used by Children (I kid you not)
• A tax break benefiting litigants in the 1989 Exxon Valdez Oil Spill
• A measure to require large companies to provide mental health care coverage on-par with physical health care coverage

The bailout package has become a Christmas tree of special pork projects appealing to special constituencies, going from its original 3 pages to 451 pages in length. 

Upon hearing the news late yesterday, my reaction was to lash out at the Republicans who voted for this and call them socialists.  After having a discussion with a friend, I realized that this was more of a frustration reaction.  Most of the Republicans who support and voted for this see this plan as a bad but necessary step.  Sen. Lindsay Graham summarizes this point of view: 

I know this is not a perfect bill and I know this is a bad choice, but I also know from my common sense and my life experiences that I need to act and I need to act now and I will.

Now, I think this point of view is completely wrong and that this bailout bill is bad for the country.  It is a step towards complete central economic planning.  By bailing out Wall Street now, we are encouraging mistakes and bad behavior.  The government is buying up assets of the private sector in such a large scope ($700 billion could take $75,000 off of every mortgage in America) and promises that in doing so, the economy will be fixed and saved.  The problem with this is that every single time the government gets involved to solve a problem, it messes things up even further.  From the example of the New Deal extending the Great Depression, to the establishment of Medicare and HMOs which significantly drove up medical costs, to the current crisis in the financial system caused by Government trying to provide homes for low-income, credit risk people, the Government does not have a proven track record at solving problems.  To quote Ronald Reagan, “Government does not solve problems; it subsidizes them.”

The other area that troubles me about this is that such a massive undertaking is being rushed through the halls of congress with little debate, little chance at improving the bill, and legislators spending their time adding “sweeteners” to the bill.  There is not, by any means, economic consensus that this bill will even solve the problem; in fact, there is much economic thought that this bill will only exacerbate it.  Contact your Congressional Representatives.  Urge them to defeat this bill.  There is still time.

Former House Speaker Newt Gingrich has articulated a very simple immediate solution to the Wall Street crisis: end “mark-to-market” (or fair value) accounting practices which undervalues assets and solve 70% of the crisis today.  That’s why Paulson thinks he can use the $700 billion to buy these assets at 10 cents on the dollar and sell them for much more, making money for the government in the long-run.  Why?  Because they are undervalued to begin with.  Change the formula to a rolling average and immediately these broken assets become much more valuable.  Plus, this could end the paralysis on Wall Street:  why would Wall Street do anything while Congress debates; why not wait until they figure it out first, market be damned?

Some of Newt’s other ideas for the long-run are:

• Create a “work-out” rather than a “bailout” plan where the government sells insurance to these troubled companies, not simply handouts. 
• Eliminate the capital gains tax, like Singapore and China.
• Reduce the corporate income tax rate to compete with the global economy and draw companies TO the US rather than to other nations with lower tax-rates.
• Repeal Sarbanes/Oxley.

Sounds like a conservative, market-oriented solution.

Another market-oriented solution is put forth by talk-show moneyman Dave Ramsey and his “Common Sense Fix” which would be considerably less expensive than the bailout plan and reassure the American people that the government isn’t simply blowing their money away.

This was a terrible bill.  To take just a few particulars, why is there no reform of the government interventions that got us to this point in the first place?  Why aren’t Fannie and Freddie being wound down — even after we’ve now had to make explicit the implicit, disastrous government guarantee?  Why is Pelosi saying (as I noted in an earlier post) that the authority in the bill will allow the Treasury Department (perhaps soon an Obama Treasury Department) to take bad debt off the hands of mismanaged state and local governments?

For the life of me I cannot understand the Corner these days.  I keep wondering where the call to “Stand up and Yell Stop” that Mr. Buckley spoke of has gone.  I keep reading about the irresponsibility of House Republicans, but how is it irresponsible to stand up and say that you think a bill is bad for America?  It is the height of irresponsibility for the Bush administration – and all those doing their bidding – to be screaming “crisis” and scaring the hell out of the American people, holding a shotgun to Congress’ head and then saying “there are NO other options.”

These are your culprits, America,  The Sub-prime Mortgage Crisis is the fault of the Democrats.  It all started with the Community Redevelopment Act of 1975, which was desinged to force banks to give low-income housing to those who could not afford it.  For the first 20 years of its existence, however, it was not highly enforced.  Author Dan Flynn on his blog, links to a city Journal article written in 2000 by Howard Hussock, which is remarkable in its description of what is happening right now with Fannie Mae and Freddie Mac. 

Republicans did warn of this coming calamity and attempt reform of Fannie and Freddie, to no avail.  This report outlines how in 2003, then Secretary of the Treasury John Snow pressed for reform of Fannie and Freddie, and warned of an oncoming crisis.  Frank, however, insisted that there was no crisis. 

Two years later, when the President proposed yet another reform package, many Democrats in the house insisted that Frannie and Freddie were solvent, and that there was no impending crisis. 

In 2005, Sen. John McCain co-sponsored a bill, along with Sens. Elizabeth Dole, Chuck Hagel, and John Sununu (all Republicans) called the Federal Housing Enterprise Regulatory Reform Act, which, if it had passed, may have helped stave off this crisis. 

Finally, Democrats by far were the largest recipients of political contributions from Fannie and Freddy.  True, Republicans are not innocent here, as McCain has received $21,500 from Fannie and Freddie.  Closer to the top, however, are our culprits above: 

• Chris Dodd at #1, with $165,400
• Barack Obama at #2, with $120,349 after only four years in the Senate.
• Harry Ried at $77,000
• Nancy Pelosi at $56,250
• Barney Frank at $42,350

True, the Republicans are not blameless in all of this.  They should have pushed harder for reform of Fannie and Freddie much earlier on.  In spite of that, however, the fingerprints of this all point straight at the Democrats.  Vote the bums out this November. 

The proposed $700 Billion Bailout failed to pass today, 207 for, 226 against.  In reaction, the DOW dropped 700+ points, before rallying again to around  a 300-point drop for the day, and is now bouncing between a 300 and 600 point drop.  As expected, the majority of conservatives opposed the bill (66 for, 132 against) but more surprisingly, the Democrats could not hold their own caucus together (146 for, 94 against). 

The question is, where to go from here.  I posted earlier today about how the private sector should be looked to as the solution to this problem.  Sure, there may be some short-term pain, but the government should do the following to help spur the economy out of this crisis. 

• Provide an incentive for other companies to buy the troubled assets — no capital gains tax on profits resulting from these purchases, etc.
• Suspend the Corporate Income Taxes and Capital Gains Taxes
• Lower marginal tax rates immediately so that more people can afford housing and their mortgages. 
• Increase liquidity by changing depreciation rules and accounting rules that do not make sense.
• Suspend Sarbanes-Oxley, the regulatory mess that stemmed from earlier this decade, and is now costing companies. 

Pushing these pro-growth policies will help to soften the crisis and put America back on the competitive map long-term.  Congress should redraft a new bill with the above, and pass it.

UPDATE:  It appears that Speaker Nancy Pelosi’s vitrialic partisan speech before the vote contributed to its failure.  What leadership.

Hat tip to MrsSal for finding this one.  With the $700 Billing Bailout package looming, the Boston Globe reports today that investment firms such as Bain Capital want a chance to bid on the distressed assets that the government is planning to “bail out.“  From the article: 

Boston’s Bain Capital and Bank of New York Mellon, along with major investment firms around the country, want to add a new wrinkle to the $700 billion federal bailout proposal: a chance to buy the same distressed, mortgage-related assets the government is preparing to purchase from troubled financial companies.

The federal bailout would establish a new government fund with authority to buy securities and other assets tied to mortgages, getting them off the books of struggling financial companies and easing the current credit crunch. Ronald P. O’Hanley, chief executive of BNY Mellon’s $1 trillion investment group, is urging the government to make room for private firms to participate in auctions of those devalued assets. Hanley said that would make the process more transparent, and would make the pricing of the assets more accurate.

“We’re suggesting that it’s a way to implement the bailout, to have an auction,” O’Hanley said. “We’re suggesting that it go beyond the Treasury, and that the Treasury right from the beginning invite others in to invest with them.”

O’Hanley said his firm has “money on the sidelines” that it’s prepared to invest in the right opportunities. And industrywide, he said, “There are lots of distressed funds waiting to buy. An auction process will provide a mechanism to bring those players in.” Distressed debt funds are pools of money put together to buy troubled securities in hopes of making a profit later.

At Bain Capital, one of the nation’s five largest leveraged buyout firms with $25 billion in untapped capital, Wall Street’s woes smell like opportunity, according to a person involved in the firm’s plans. That opportunity could take shape in a number of ways: buying troubled financial companies, or pieces of them, cheaply; and in the form of buying mortgage-backed securities at distressed prices, in order to turn a profit on them later.

What this goes to show is that the free market works.  What is one company’s liquidity problem is another company’s bargain.  While Paulson has claimed that the bailout is necessary to give these companies liquidity, this shows that there are plenty of other companies willing and able to invest in these securities at bargain-basement prices, with the idea that most of the assets will eventually rebound.  The bailout package should be reconstituted to allow companies to bid on the assets and give private investment firms first crack at the assets.  A private solution is always superior to a government solution, and should be considered by Congress as an alternative.

No real down-home American can stomach the $700 billion Wall Street bailout suggestion of Treasury Secretary Hank Paulson so rumor has it Congress has a draft bill going around which will do something different:

$250 billion immediately

+

$100 billion a bit later

+

$350 billion thereafter

= Ok… carry the one… all right…  $700 billion?!?

This Congress makes me sick.  And not just me, Newt Gingrich called this nothing short of “Un-American” because of its overt socialism and that this bloated anti-capitalist, anti-free market, government-centric fiasco will be a loser on Election Day.

The community organization ACORN ( Association of Community Organizations for Reform Now ) has had a real pattern of voter fraud through a history of sketchy registration practices and embezzlement.  They are die-in-the-wool Democrats rooting for Barack Obama obviously.  ACORN also has successfully gotten their hands into a Congressional slush fund designed to hook up low-income people with risky home-loans.  Believe it or not, the Dems are even trying to continue to hook up their ACORN buddies in a version of the Bailout Plan still being debated!  Shameless.

It’s completely outrageous and an investigation should take place before election day, since the potential for ACORN to mess with polling nationwide is probable especially if the election is close.   By the way, they also have history with Barack Obama as their attorney back in the day.

Frank Luntz’s focus group had a number of things to say last night after the first Presidential debate between McCain and Obama.  Here’s the video link.

Most of the group of undecided voters generally liked what Obama had to say more than McCain.  I was put off by their focus on Obama’s style and empty populist promises. 

Some lefty pundits are saying this morning that if the debate was a tie, it goes to Obama.  Others had a different point of view.  I seem to be hearing that if Obama can make himself look like a possible Commander-in-Chief, he comes out ahead. I’m not convinced of that, but on the Debate itself, I don’t think it was a tie at all – Obama nearly looked ready to cry by the end of the night.

Since “the sky is falling” seems to be the only thing I’m hearing from many Republicans this week, I am writing this post to share some perspective with you.  John Podhoretz writes this piece today asking everyone to chill out and take a breath for a moment.  I agree with him, and so should you.

Now, scroll down to Salinger’s “What’s in a Poll?” post, read it and the comments, then come back.

[Cue Elevator Music]

OK.  Got all that?

As you now know, the polls lately have not been in our favor and I do believe that McCain-Palin have lost some momentum in the last ten days.  But, the first debate is only “postponed” not cancelled and who does that really effect in the end?  Is your life seriously altered as a result?  Remember, the polls had Jimmah up 30 points on Ford in September 1976, yet Jimmah only won by 2.1 points.  And as Podhoretz argues, it’s the really only the pundit class that is hyperventilating over all of McCain’s recent actions and the numerous bunk polls which happen to favor their candidate.

So relax.  Give it some time.  Maybe the debate postponement will benefit us in some way, maybe Obama will gaffe during those debates, maybe an “October Surprise” from Reverend Wright will make this smooth sailing.  

Who knows?  Right now, there’s nothing we can do but watch, call Congress and yell about the socialist $700 billion scheme, and keep on keepin’ on.