Five Stocks to Buy if Obama Wins
We find ourselves in very interesting times. I can say that in all my years of market participation, I have never witnessed anything like the Fannie & Freddie bailout. The closest thing to it was probably the Resolution Trust Corp. (RTC) of the early 1990s that was used to clean up the S&L crisis.
At the end of the day, I come down on the side of Warren Buffett when he said, "Whatever they lose from this plan, if they hadn’t acted, there were going to be greater losses down the road."
Moral hazard, greed, call it whatever you want, but management had a blank check to buy any and all paper being offered, secure in the knowledge that they would be bailed out. The executives of both companies sold out the U.S. taxpayers for the sake of a bigger end-of-year bonus.
But that’s done, not even God can change the past. As investors, we need to ask: Where are we now and where are we going? At some point, housing prices will recover, but the Treasury (AKA me and you taxpayer) will take some steep losses because of the amount of fraudulent mortgages that were originated.
The problem the Treasury faced was that Fannie's and Freddie’s five trillion dollars worth of bonds are hard-wired into the global banking system. Those bonds have been used to secure trillions and trillions of other loans. Should they have gone bankrupt, it would have resulted in a global scramble for cash that would have put the 1907 money panic to shame.
So it’s done, and just like the S&L crisis of the '80s and '90s, we’ve got to suck it up and move on. Have no fear. We will move beyond the present day doom and gloom and the sun will shine again for our financial markets. Every 20 years or so, the U.S. banking system goes through one of these shake out periods. Its the Darwinian aspect of capitalism at work. Ultimately, we will emerge form this period stronger and wiser in our dealings. Remember, it never pays to go long-term negative on the United States.
A couple of weeks ago I wrote an article titled “8 Stocks to Buy if McCain Wins”. In the spirit of balance, I want to give the same treatment if Obama should win.
To date, the Obama camp has promised more taxes on the rich, windfall profit taxes on oil companies, higher corporate taxes, higher payroll taxes, national health care and energy independence in 10 years. As these policies are attempted to be enacted, they will have very profound impacts on certain sectors.
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