Uncle Sucker

A bail out package of $700 Billion will cost the average American family over $10,000.

Is this fair? Consider the pay package of the new Washington Mutual CEO, who has been on the job for 3 weeks.

“NEW YORK (CNNMoney.com) -- Washington Mutual Chief Executive Alan Fishman could walk away with more than $18 million in salary, bonuses and severance after less than three weeks on the job, according to the terms of his employment agreement.”

Wow, the stock is worthless. WAMU is bankrupt and stockholders all got burned. An $18 million dollar payday for 3 weeks on the job? Is it any wonder that polls overwhelmingly show the average taxpayer does not support the current wall street bailout package? Washington's bailout plan is apparently in trouble. With lawmakers saying their e-mails and phone calls from constituents back home are running as much as 100 to 1 against the bailout, it may be difficult for them to vote for it and then go home to run for re-election. But something has to be done before they break for the election recess this weekend.

One interesting note on the economy is new home prices plunged 11.8%, not in a year, but from July's level. That is going to lead to more defaults and foreclosures, which were already soaring.

The only question is which banks will be going out next? Wachovia is the next big bank rumored to be teetering on the edge.

What a Week!

The stock market was down 8% from Monday to Wednesday and up 8% from Thursday to Friday to finish the week flat.

This is a period in the financial markets you will be telling your grandchildren about, the closest the U.S. financial system has come to meltdown since 1931, and the first time in its history the U.S.A. moved so far and abruptly from democracy and a free market system toward socialism, government control of markets, and nationalization of its financial institutions.

My current recommendation is to take 50% of your portfolio and burry it in the backyard and take the other 50% and hide it under a mattress in the upstairs bedroom.

Waiting for Godot

Waiting for Godot is a play by Samuel Beckett, in which two characters wait for someone named Godot, who never arrives.

Waiting for a market to bottom feel a lot like waiting for Godot. You are always wondering when he will show up. I think we are closer to the end of the play then the beginning and patience is our friend. The market will bottom and there will be a great buying opportunity but we must wait for a couple of things to take place. First and foremost the market must make a new bottom. This mean the S&P must break down below 1,200. Second, we must see a reading of over 30 on the VIX (Fear) Index. As the chart above shows we are currently at 25 so 5 more points up and we have a green light to be a buyer.

Sit and Do Nothing

That’s my current recommendation – better to be in cash earning 2-3% then watching the market go down day after day. This market sure looks like it wants to continue falling. Looking at the below chart and see the pattern of lower highs and lower lows. I think the current market will bottom sometime in October – November and then it will be time to put your cash to work – but for now it’s all about patience.

Here Comes September

September has been, on average, the worst performing month for the stock market with an average return of negative 1.13 percent since the Dow inception in 1896. This market sure feels like it is due for a major correction of somewhere between 10%-20% as we head into the last part of the year. I think the market will bottom for the year around the October – November time frame.

Georgia's Integrity Bank is Closed by State Regulators

Integrity's closure is the 10th bank failure so far this year. The bank had $1.1 billion in total assets and $974 million in total deposits as of June 30, the FDIC said. The bank had $1.1 billion in total assets and $974.0 million in total deposits.

The Next Crisis

It’s only a matter of time before the next shoe drops and you will start hearing about the massive defaults in consumer credit card payments. The stock market has not produced any wealth in the last 8 years. Home prices have come down sharply and will continue to fall for the next couple of years. The only place left to turn for the average American to maintain the world’s highest standard of living is their credit card.

Unfortunately, credit cards are the highest priced debt on the menu. The average balance and delinquency rate has been rising steadily in 2008. As the credit crunch moves from the 3rd to the 4th inning banks will start to tighten credit standards and raise the interest rate on the current credit card balances. None of this will be good for the economy or housing prices. It is going to take years to unwind the credit mess.

Time to Buy Gold?

Gold has come down faster than the market has risen in the last month. The 52 week high for gold is just a little over $1,000 an ounce. It is now currently trading at around $770 an ounce. That’s down over 23% in a little more than a couple months. No matter where the long term trend for gold is headed it should at least see a short term bounce up to the $850 an ounce level.