Debates, Banking and Shortages

Tonight the nation watched as presidential hopefuls Senators McCain and Obama debated the state of the economy and their ideas for foreign policy. My own politics aside, I felt that both sides delivered some interesting points regarding their vision of the future. Some I agreed with, and some I did not.

Like many Americans I was eager to hear about the state of the economy and what McCain and Obama planned to do about it. Many of us have heard about the proposed $700 billion bailout plan for our nation’s banks and lending institutions. Both Obama and McCain agree that action must be taken, but were somewhat divided on what route to take.

Obama said tonight that he would like to keep taxes at their current levels or lower them for 95% of working Americans. According to Obama, only people earning more than $250,000 a year would face a tax increase. Obama said he would also close corporate loopholes for tax purposes and encourage tax breaks for businesses that don't export jobs overseas.

McCain argued that government spending has gotten out of control and he would attempt to reign in it. Pork-barrel spending and earmarks have become widespread and at time fraudulent, McCain said. For those of us to don't immediately recognize those terms, McCain is basically saying that his fellow Congressmen and women are spending too many tax payer dollars on their own personal projects. He would look to drastically reduce, or freeze spending on everything but none essential programs. McCain said these programs would be defense, veteran’s affairs and entitlement programs.

Our nation's two primary presidential candidates spoke on several other issues, but for the purpose of this blog, I was mainly interested to hear what they had to say about the economy. I suspect this debate, as well as the outcome of the bailout plan will have a large impact on the stock markets next week. For those who are interested - the latest information about the proposed $700 billion plan is that a bi-partisan (dems and reps) agreement should be reached sometime Sunday.

The next thing of interest today was the failure and subsequent purchase of Washington Mutual bank. JPMorgan Chase bought WaMu's banking operations ($307 billion in assets) and deposits ($188 billion) late last night. JPMorgan's price tag? Only a one-time payment of $1.9 billion to the FDIC. This is the single largest bank failure in history. To put it comparatively, the previous record holder (Continental Illinois in 1984) had $67.7 billion in assets - adjusted for inflation.

Needless to say, this bank failure was huge and the stock market reacted accordingly today. The Dow, NASDAQ and S&P 500 were all in the red for most of the day with only the Dow and S&P ending the day slightly positive.

As you can imagine, many stockholders have watched their portfolio values move up and down with the daily fluctuations in the market. It has not been an overly pleasant ride. I myself am down some 20% to date overall - though not all stock picks are in the red. And yet as long as I still believe in my initial valuations and quality of the business, I'm not tucking tail and running. I still believe that in the longer term (3-5 years), each and every one of my initial investments will end in the positive. Of course not every investment will double my money, or even prove to get back to break-even. But until a company's business is somehow changed, I'll keep my money in it even when the market is throwing a temper tantrum.

My final thought of the evening.... gas. I've been keeping my eye on several energy/oil companies lately, looking for a solid investment at a time when oil is off its 52-week high. Having come across a company I'm interested in (Shaw, Alicia: if you're reading this you know where I'm looking), I took a little time to learn about oil/gas and supply. It led me to this article about a looming gas shortage.

I'm not a fan of fear-mongering, and I'd like to think I'm a little more environmentally conscious than the next guy; but when I read articles about a coming shortage, I see opportunity. I'm no "oil-man", and I long for the day when we can burn a renewable, clean fuel source for power. But I have dreams and goals like everyone else and I'd like to be able to fund my future. Oil prices have been (gratefully) depressed lately, but supply and demand is simple economics. If I had a spare $1,000 to toss into a company right now, I'd give some serious thought to making it an energy company for the time being.

As always, doing your own research is strongly advised before purchasing and stocks or securities. And I remind you that I have no formal training or education in any form of finance or accounting. I'm merely condensing what I've gleaned from my own reading and passing it along to whoever may be interested. That being said, I think the most successful investor is one who buys when others are fleeing (read: buy when there's blood in the streets).