The Real Wall Street Doesn't Deserve to Be Ruined

Sec. of the Treasury Henry Paulson bailed me out of some losing positions I had in the stock market last week when he introduced his two-and-a-half page proposal to save the global markets. I came out smelling like a rose, thank you, Mr. Secretary, because the stock markets rallied sharply on the news of his proposal. As a result, several of my stocks that looked like losers to me early in the week turned out to be nicely profitable, and I sold them. Or more accurately, I let them be called when the call options on them expired Friday.

Earlier in the week, when it still wasn't clear that you'd try to bail out AIG (AIG) and other holders of "toxic" mortgage-backed securities, I dumped four of my five banks at nice profits because I was afraid that they were about to swoon. I held on to my Wells Fargo (WFC) until the end of the week, and made a nice profit when it was called, thanks to the Paulson bailout proposal. Monday, some banks were down as much as 13% to 15%. I sure was glad to be rid of my bank stocks by the close of trading Friday, because I feared, correctly, as it turns out, that Paulson's bailout plan would meet a firestorm of criticism, second guessing and earmarks. I just knew the bailout couldn't be so easy, and the more I read and hear about how banks and insurers and small speculators like me can be saved, the more difficult it looks.

The people who created the mess and made it worse over the last two or three decades, members of Congress, are the loudest critics and most important obstacles to meaningful reforms. To be fair though, the markets showed their scorn for the Paulson plan and Congressional second guessers Monday when the Dow Jones Industrials plunged 378 points, or 3.3%, and the Nasdaq lost 4.2%. I fear stocks will going much lower before this bear market ends. And I don't think either Paulson or Congress are going in the right direction with this so-called bailout. I'd rather see a law that forces all the companies holding toxic securities to suspend their dividends, raise capital by selling more stock and deny golden parachutes to the people who made the big mistakes that got us into this mess.

I'd also like to see a few of the Congressional backers of Fannie Mae (FNM) and Freddie Mac (FRE) - despite repeated warnings - lose their seats. So much for wishful thinking.

The point is that little traders like me who are trying to build their retirement nest eggs are the real Wall Street. We're the folks that own the 401ks, pension funds, mutual funds, exchange traded funds and stocks that Paulson is trying to save. Yes, there are big money folks on Wall Street who've made big mistakes that have put all of us at risk. But the politicians need to be careful to not punish us little speculators [investors] who had nothing to do with the mortgage bankers' lending practices or Wall Street's disastrous financial "innovations" that have us all wondering about our futures. The only dumb thing we small speculators [investors] did was buy the wrong stocks and mutual funds. We bought the Bear Stearns, Lehmans, AIGs because they looked strong and profitable, not understanding the games they were playing. We counted on the professional money managers who manage our mutual funds to keep us out of trouble. Good luck with that. We just wanted to make a buck like everyone else, and like the dumb smart guys on Wall Street, we made some big mistakes when we bought those stocks and believed that mutual funds can invest our money better than we can. We're all speculators. We'll be punished for our lack of insight as speculators, but most "compassionate" people believe we don't deserved to be ruined along with the Wall Street big shots who are losing their fortunes and reputations.

Disclosure: No stock positions.

Comments

[whidbey:]

Your pleas are heart rendering, but invalid. You played and you should have paid like everyone else, little investor or large. Fools wandering in paradise are at risk and that is the lesson you need to know. The risk Hank rescued you from was real and the rescue a selfless act that benefited you. Now give it to charity; it was a pure chance gift.

2008 Sep 23 10:05 AM

[Research123:]

If joe six pack investor is thrown under the bus in the name of consequence purity, there will be blood in the streets. Do not assume that just because we have not seen a violent uprising in this country since the Civil War that Americans are not capable of taking the law into their own hands in a big way. Think food riots, think massive failure to pay any and all bills, think the end of capitalism as we have known it for the past 50 years.

Get smart and get real - as ugly as it is, Paulson's bailout is the only chance we have to keep the banking buisness from going over a cliff.

2008 Sep 23 10:38 AM

[OldDog:]

I can't believe that they published your comments. I can only assume that you haven't been in the market for very long. While you were making your trades last week, you probably should have bought lottery tickets.

Anyone that rode AIG from the high 60's or Goldman Sachs from 220 to their current values deserves what they get. When you put your money in the market, whether actively managing it, or through an index fund, THERE IS RISK.

Hopefully Mr. Paulson doesn't get his Blank Check and Congress will insist on a better deal for the Tax Payers instead of Wall Street.

2008 Sep 23 10:41 AM

[knot2hazy:]

The banking business deserves to go over a cliff. Paulson's bailout is bad, just like the choices for president ... and bad is bad, period. Like someone said, you can put lipstick on a pig .......

2008 Sep 23 10:51 AM

[Donald Johnson:]

First, I've never owned AIG or the investment banks. Too risky, and I don't ride losers. I sell them. I'm ok because I'm a speculator, not a gambler. There is a difference.

Second, I can be as much of a market purist as anybody, but what's made America prosperous is our ability to adapt and innovate as well as put people who make bad decisions out of work and crooks in jail.

Third, my annualized returns since I got back into the market in a small way in early June are very positive. I'm making money, not just beating the averages.

Fourth, anybody who doesn't see how the Paulson plan is intended to help main street doesn't understand the markets or the economy.

2008 Sep 23 11:33 AM

[williambanzai7:]

CHARGE "OFF" THE TARP BRIGADE

(Charge of the Light Brigade, Alfred Lord Tennyson)

(Modified by WilliamBanzai7)


Half a trillion, half a trillion,
Give or take 200 billion, onward!
All in the valley of Balance Sheet Death
Rode the seven hundred billion tax dollars.
"Forward, the TARP Brigade!
"Charge for the ABS Credit Default Swaps!" he said:
Into the valley of Balance Sheet Death
Rode the seven hundred billion tax dollars.


"Forward, the TARP Brigade!"
Was there a politician dismay'd?
Not tho' the Congress knew
Some guy named Hank had blunder'd:
Their's not to make reply,
Their's not to reason why,
Their's but to do and die:
Into the valley of Balance Sheet Death
Rode the seven hundred billion tax dollars.


CDOs to right of them,
CDSs to left of them,
AIG and the GSEs in front of them
Volley'd and thunder'd;
Storm'd at with Wall Street shot and shell,
Boldly that load of Federal largesse rode and well,
Into the jaws of Balance Sheet Death,
Into the mouth of subprime contagion Hell
Rode the seven hundred billion.


Flash'd all the workout sabres bare,
Flash'd as they turn'd in air,
Sabring the asset backed losses there,
Charging an army of tawdry bankers, accountants, and shysters, while
All the world wonder'd:
Plunged in the seedy subprime-smoke
Right into the red numbers they broke;
Lehman and Bear Stearns
Spared from the sabre stroke
Shatter'd and sunder'd.
Then they rode back, but not
Not the seven hundred billion.


Subprime CDOs to right of them,
Subprime CDSs to left of them,
Fat Wall Street advisory fees behind them,
Volley'd and thunder'd;
Storm'd at with derivative losses, asset backed shot and shell,
While level 3 zeros fell,
They that had fought so well
Came thro' the jaws of Balance Sheet Death
Back from the mouth of subprime contagion Hell,
All that was left of it?
Nothing left of seven hundred billion!


When can its glory fade?
O the wild loss charges!
All the world wondered.
Honor the huge expenditures they made,
Honor the TARP Brigade,
Noble seven hundred billion taxpayer dollars.


(TARP--Troubled Asset Relief Plan of 2008)


williambanzai7.blogspo.../

2008 Sep 24 12:09 AM

[User 218984:]

Get over yourself. Paulson doesn't give a flying f**k about you or any other shareholders or creditors. He cares about his cronies and perhaps secondarily about payrolls being met, day to day business operations continuing and the Treasury being able to roll over debt and obtain new funding. All the rest, yourself included, are going to be thrown overboard or under the bus. Hope is not a strategy.

2008 Sep 24 05:48 PM