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Nationalizing Banks

Apparently the current excuse for the stock market slump is “fear” of banks being nationalized.

We have been nationalizing banks for years. That is one of the main jobs of the Federal Deposit Insurance Corporation [FDIC]. They seize troubled banks, usually on a Friday, clean up the balance sheet, and sell them to another bank, so that when customers show up on Monday, they still have access to their money. Washington Mutual was nationalized fairly early in this mess.

Normally, stock holders lose, but they should have been demanding truth from management and not taken rosy scenarios accompanied by high dividends for granted. When a corporation starts doing a whole lot better than anyone else in their sector, they may have discovered the perfect business plan, but it is more probable that whatever they are doing is going to end badly. Any time you encounter a management team that is unwilling or unable to explain what they are doing, sell the stock.

BTW, you shouldn’t be taking investment advice from me or anyone else. If you don’t understand what is going on, don’t get involved.

2 comments

1 Jack K., the Grumpy Forester { 02.20.09 at 11:00 pm }

…heck, I don’t even trust my own investment advice; why would I trust the notions of someone who willingly elects to live in the path of oncoming hurricanes?

[reflects on the surrounding highly flammable forested neighborhood and all those suspiciously dormant nearby volcanoes; dismisses these concerns out of hand]

It has become grimly fascinating to watch the gripping obsession with which the media focuses on the daily casualty report from the Dow, SP500, and Nasdaq. While these markets do as a whole represent a significant segment of the investment world, the way that these markets can be spooked by rumors, casual comments, and shoot-from-the-hip instantaneous commentary strongly suggests that a good supply of Bell canning jars with new lids, a shovel, and some available space out back behind the edge of the lawn is as good an investment strategy as anything else…

2 Bryan { 02.20.09 at 11:51 pm }

My Mother has been in interest bearing, fully insured accounts for years. She’s done this once, and wasn’t interested in doing it again. She is completely liquid and her money increases, at a very low rate to be sure, every month. Her stock portfolio dropped when the Shrubbery came in and wasn’t doing anything when she finally made her move. It made money for her under Clinton, but nothing this century. The other thing she didn’t like is that her brokers kept getting bought up, and when UBS bought them, she lost the broker she had always worked with and didn’t like the new guy.

She got out of real estate in 2004, and made money not only on price, but on holding the mortgage when she sold it.

The last “deal” she turned down was an annuity being pushed by AIG. She does all right and I pay attention to her. She does watch Cramer, but for the entertainment value, not advice.

She was a bookkeeper for 45 years and wants the numbers to balance.