Is your money safe – or is it in a bank?

Today, the Federal Reserve launched another new facility aimed at purchasing certificates of deposit and commercial paper from troubled money market funds in an attempt to return liquidity to those markets.  Another black hole to wheelbarrow our tax money into.  Nice. 

Please hold your applause until the end of the newsletter.  And I say that with a great amount of sar­casm.  This move is just another IV of fresh blood going into a patient with a cannonball-sized hole in his chest.  It might be prudent for us to point our cash at the underlying ailment as opposed to the re­sulting symptoms.

For the first time in our country’s history, our leaders are acting more like a bank than like a govern­ment.  The only difference is, banks usually try to fleece whoever they’re doing business with by driv­ing a hard bargain and reaping maximal returns.  But, we can’t kick our ailing financial system while it’s down for the sake of taxpayer profits.  So, through a tangled web of overly-rushed legislation, we have effectively privatized the banks’ profits and socialized their losses.

So, we’re acting like a badly run bank.  Essentially, we’ve become a one-stop shop to dump any assets that had value, may have value in the future, and are currently valueless. 

Another monumental failure is Hope for Homeowners, a program which heavily suggested that lenders be more flexible in writing down the principal balance of some troubled loans.  This author is hardly surprised that banks didn’t want to absorb billions of dollars in forgiven debt just because we asked really nicely.  Evidently, anything a republican administration does involving the word “hope” back­fires.  Which has led me to suggest the “Impending Doom for Homeowners Act” to capitalize on the apparent effectiveness of reverse psychology.

It’s a joke.  Lighten up.

The fact is, trying to guess what the markets are going to do next is a futile effort.  Half of the invest­ment community are dialing 1-800-GET-ME-OUT-NOW every time the markets hiccup.  Now is the time for a disciplined approach to our financial lives based on history, current market facts and sound professional advice.  Divorce yourself from the temptation to succumb to volatile emotions. Capitalize on the opportunities this shake-out is creating.  Ask questions.  Be proactive.  Be patient.

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