What The New Bailout Bill Won't Fix

If Monday’s rejection of the president’s bailout bill means one thing, this is it: You must take action to protect yourself from the next 777-point collapse because it’s abundantly clear that Congress won’t. Today’s 300-point decline that comes on the back of the Senate’s new bill proves what I mean.

Congress’s bungling of the bailout bill out has me shaking in my boots. But not because of another impending disaster. I’m shaking because the no vote and today’s sell-off isn’t the end of the line for America—it’s actually the beginning of a better deal for taxpayers and investors.

Hard to believe? You bet. But not when you see what will happen when a new and improved bailout bill passes. As you’ll see…

The market will reverse its 777-point decline as the U.S. financial markets—and the whole world—sighs a breath of relief. Just look at how the market jumped 450-points higher on Tuesday hopes a new improved plan is in the works!

Mark my words—the same thing will happen again Monday when Congress votes to approve compromise legislation on Friday! The chain reaction will result in more stable and responsible financial .

What’s more, the strong companies will get stronger. You needn’t take my word. Just look at Bank of America’s takeover of Merrill Lynch, JP Morgan’s takeover of Washington Mutual and Citibank’s take over of Wachovia, and you’ll see what’s headed your way.

MOST IMPORTANT: Cash will be king on Wall Street again as banks no longer pass out credit like pancakes at a fireman’s picnic. Despite what the Feds want you to believe, the NEW and IMPROVED bailout bill that’s ultimately passed will not only make credit tougher for individuals to get, but also tougher for businesses, as well.

Who Wants To Be The D-e-p-r-e-s-s-i-o-n President? Obama or McCain?

What a load of bull! The worst isn’t over – not by a long shot. We’re going to see runs on small-town banks, as people steamroll each other to get their money out while they still can. We’re going to see more “safe” money markets worth under a buck a share. And mark my words, we’re going to see several more big names go belly-up, as the politicians finally realize they can’t stop this panic with smoke and mirrors.

The truth about the economy is so bad that Barack Obama and John McCain might be changing their minds right about now. I’m betting neither one of them is looking forward to being tagged as the next Depression President. That’s right. D-e-p-r-e-s-s-i-o-n.

Even just typing the word makes me shudder. But at this point, the Americans would be foolish not to own up to the very real possibility. Wall Street understands. Year-to-date, Lehman Brothers is down 99%. American International Group is down 95%. Washington Mutual, Fannie Mae and Freddie Mac, down 94%, 98% and 99%, respectively.

These are not sniggering little companies. These are giants. These are some of the very pillars of American finance. Throw in Merrill Lynch, Citigroup and Bank of America, and it’s very plain that the foundation of U.S economy is crumbling. And as far as the average Joe or Jane is concerned, the economy is already in shambles.

And it’s going to get a whole lot worse. Worse? Yes, unemployment soared to 6.1% in August. That came as a surprise to economists. Home prices are down some 16% year over year. The magnitude of the drop surprised economists. Retail sales fell 0.3% in August. They were revised down 0.5% for July. Both numbers came as a surprise to economists.

Are you starting to see a trend here? All the eggheads and government wonks have consistently underestimated the depth and breadth of economic troubles. They said the housing problems would be “short-lived.” They said their financial system was “resilient and strong.” They said the stock market would “recover by the end of the year.” None of that is happening. And if you hold your breath waiting, it just might be the last breath you ever take. 2009 is going to be a devastating year for Main Street and Wall Street.

The so-called “bailout” of American International Group!

The U.S government is taking a viable company with a short-term liquidity squeeze and using that as an excuse to almost completely destroy shareholder value. The Fed could have simply issued a “bridge loan”; but instead, they insisted on a complete takeover. And small investors are getting SCREWED again.

Lehman Brothers. Merrill Lynch. AIG. The financial system is near total collapse. And the market could crash all the way down to Dow 8,000. AIG got caught in the “perfect storm.” I’m talking about the most successful insurance company on the planet, caught in the maelstrom of the subprime mess.

In the long term, most of AIG’s assets are fine. But short-term – as is happening throughout the financial industry – no one really knows how to value all the derivatives on its books. And if no one knows what they’re worth, government “mark to market” rules demand that these assets be valued at virtually nothing.

That’s why AIG’s credit ratings got slashed, which sent carrying costs soaring and pushed the company to the edge of bankruptcy. So in stepped the government – and wiped out billions in shareholder value.

It was a Sunday night massacre on Wall Street!

Lehman Brothers filed for bankruptcy. And the venerable Merrill Lynch was taken over by Bank of America.

Bank of America? What a joke! That’s just another house of cards that could come crashing down at any moment. After all, these are truly desperate times. Analysts now admit that subprime losses will eventually total up to $1 TRILLION —and not even half that amount has been written off so far.

Frankly, this could be the end of the banking system as we know it. But it’s not just the financial sector that’s weighing on the stock market. The entire U.S. economy is riddled with risk. The retail sales numbers for August just came out. They fooled all the experts, who were looking for a 0.3% gain. They fell 0.3%, instead. What’s more, the July numbers were adjusted to a miserable minus 0.5%.

I won’t bore you with all the charts and graphs. But PLEASE, do take a moment to look at this one. Your wealth depends on it. It shows a rapidly-increasing percentage of companies are hitting the skids, in regards to sales. And if sales are dropping...earnings will follow them down...and so will stock prices.

That’s not a pretty picture.

What’s more, latest research shows:

• Companies can’t borrow money. The credit crunch is turning into a death grip.
• Companies are slashing capital spending to the bone.
• Companies aren’t hiring. Good luck if you expect the American consumer to turn this ship around. No jobs. No equity in their homes. Maxed out on credit cards. Forget about any soft landing to this CRASH.