Well, well, well......yesterday everyone was told that congress was ready to play nice with each other and actually work for the American people. In the end we found out that in fact, they just didn't have it in them. They couldn't hold themselves back from playing the same political games that are partially responsible for the mess we are in now. I don't know if it was Pelosi's speech that threw Republicans into a tizzy (if it was, how utterly ridiculous and thin skinned of those Republicans), but the speech was certainly not needed. Regardless, the bailout package failed and investors bailed on stocks - giving us the worst one day point loss in two decades.
Where do we go from here? I can only imagine that the two parties will come back together, curse each other out, blame each other then come back to the American people with a package that works....and actually pass it. This will not be the final measure, but it would be a good start - it is a bank bailout or a partial recapitalization of the banks (after all, we are overpaying for the assets).
The bottom line is that America is suffering from a lack of leadership, Paulson and Bernacke are attempting to step in, but so far are not making necessary progress. President Bush is a lame duck with a low approval rating and congress has the worst approval rating in history - we are in a leadership vacuum. We need strong leadership and we need more transparency in our markets, we also need a solution to the housing/foreclosure problem - without this, nothing will change.
This doesn't mean you should be eternally pessimistic about stocks. Stocks are on sale, they may go on sale further (I guess that might be a clearance?) but they are not going to go down forever. History shows us that stocks recover and those that hold on should be well rewarded.
Hang in there and read my next post with Jason Zweig.
Scott Dauenhauer CFP, MSFP, AIF