Panique! The scent of desperation

We've reached the point of full-blown worldwide stock market panic, something not seen for at least 30 years. People are scared, physically scared, and they're selling off stocks at almost any price to be able to hold on to something, rather than lose everything. So many stocks have been driven down below any rational valuation that it should be a great time to buy, except that people are afraid that prices will go still lower.

This is the point where investors have to look at the fundamentals of companies rather than their stock prices to regain their composure. The question is: Will this company go bankrupt? Companies such as Kraft Foods, Johnson & Johnson, Heinz and Procter & Gamble are going to stay around--people need their products in good times or bad. In tech stocks, IBM, Cisco, Microsoft and Apple certainly aren't going away, although their stocks could go lower. On the other hand, I think that Ford and GM are radioactive, because both companies have a significant chance of failure. People will always need cars and trucks, but there are lots of alternatives, many of which are better managed and better prepared to handle market conditions. And, I wouldn't touch any of the financials with a ten-foot pole, no matter how much of a "bargain" they become. There are still far too many unanswered questions about who will live and who will die.

With all that said, I completely understand the panic that investors are feeling. People who are in their 50s and 60s are seeing their retirement funds obliterated, and they may not have enough time before retirement to recover. My parents, both of whom lived through the Great Depression, often told me what happened to them and their families, and I've read extensively about the Depression's causes and effects, but I'm finally beginning to understand.

Can we get this deal done, please?

I've been watching the stock market yo-yo and the liquidity markets freeze up while we wait for the on-again, off-again bailout plan. At this point, tt doesn't matter which party was responsible for the failure--either one could have produced the 12 additional votes that were needed for passage. The U.S. Senate plans to vote tonight on a modified bailout plan that keeps the basics of the plan voted on last Monday, but adds some tax benefits for individuals and small businesses, and raises the maximum per-account level of FDIC insurance from $100,000 to $250,000. Whether these sweeteners are enough to get the 12 additional votes needed in the House, let alone hold onto the votes that the original bill got, remains to be seen.

The lack of safeguards that I complained about in a post on my "Feldman File" blog was addressed in the version of the bill that originally went to the Senate. While I despise what got us to this place--the almost complete disconnection of capital from its underlying risk that's led us to having no idea how much more than a trillion dollars of securitized mortgages and other debts are really worth--we have to act. We've got to make sure that people can still get home, car and student loans, and that businesses can buy inventory, meet their payrolls and keep their doors open.

As I write this, it appears that "the tide is turning" with members of the House who voted against the original bill. Their "call ratio" from constituents is turning in favor of the plan, thus giving them the political cover that they need to vote for the revised bill. However, I won't count on anything until the bill passes both Houses of Congress and is signed into law by the President.