Last week, I wrote an article called "Bailout: The Sucker Punch," and was pleasantly surprised with the outpouring of comments and emails from passionate people. I enjoyed reading each and every one of them. (Too bad it's under such difficult and frustrating circumstances for so many of us.)
On the other hand, I'm also seeing some arguments defending the bailout in the media and even here around the Fool that -- with all due respect -- I don't agree with. Here are a few examples.
- Americans should be angry at those in Congress who, uh, listened to Americans and voted down the bailout bill. Last I heard, in our country the people's will was at least supposed to be taken into account. The implication that taxpaying, voting masses' opinions shouldn't be considered in important decisions is odious to me. I think it's also called an oligarchy.
- People who are angry about the bailout just don't understand economics. Actually, I get the impression many people who are against the bailout do realize what's at stake and probably don't see how, for example, putting artificial floors under housing prices has anything to do with supply and demand. And of course, there are the many people (including some economists), who are pointing out that our economy has suffered distortion from the flood of easy credit over the years -- and that must correct itself, despite government attempts to engineer it. I think what many people don't understand is how we've allowed debt-driven, "bizarro-world economics" to fire up our economy for more than a decade.
- But our 401(k)s! I am truly sorry for people who need to retire soon and have seen their 401(k)s get hit. However, who said the stock market wasn't risky? There is no such thing as a permanent bull market, as much as human nature might wish there was. Trying to artificially prop up stock prices (for example, banning short selling) makes me wonder if we're just a breath away from shutting down the stock market until it "behaves." That's not how a real market works, folks.
- If we profit from the bailout, at least that's some consolation prize for the poor taxpayers. Um, no thanks. I'm not interested in the government investing for me, and certainly not in toxic sludge; when I wrote this article, I made it clear that I had no interest in investing in companies like Lehman Brothers, Merrill Lynch (NYSE: MER ) , Fannie Mae (NYSE: FNM ) or Freddie Mac (NYSE: FRE ) . I thought it was a terrible idea even as many people insisted they were "cheap" (and then probably lost their shirts). So I'm a bit offended at the concept of the government obtaining equity stakes in financial companies.
- But, again, we might profit. I am a fan of long-term profits, but those that are built prudently and wisely. The idea that "profit" makes just about anything OK reminds me of exactly why we're in trouble to begin with -- short-term thinking that excuses ill-conceived strategies, and confusing speculation with investing. Also ironic: the government doesn't seem too concerned with operating profitably, given its own mind-blowing debt load.
- When there's a crisis, sometimes your principles have to go out the window. Um, I'm pretty sure many totalitarian regimes made great strides when people took on that attitude. I think we all need to take a collective breath and slow down, and maybe think about whether our principles can be bought and sold so easily.
I have no plans to sell my stocks or to cash out my 401(k). Actions like that are based in panic, and panic will only make things worse. I am holding on despite the fact that I own shares of three consumer-facing companies -- Starbucks (Nasdaq: SBUX ) , Whole Foods Market (Nasdaq: WFMI ) , and Urban Outfitters (Nasdaq: URBN ) , all of which may suffer in a serious consumer-led recession (and two have been struggling with the slowing consumer climate already). But I believe that all three are good companies with excellent long-term attributes, and even with the potential for hard times to come, investors shouldn't forget to look for great companies whose stock prices have been beaten down in the rubble.
I don't believe the bailout will stop the recession and the inevitable correction from happening. In fact, I believe the bailout may even prolong our problems and make things worse with rising inflation and taxes, not to mention additional debt-driven distortion that many are concerned about (or a major contraction as all that credit tightens, as it eventually must). Still, for the long term, I do believe we will persevere, if we all make the sacrifices we must make. We need to set our sights on saving and creating, instead of debt and consumption -- let's not forget we Americans are innovative, too.
What do you think, though? Feel free to chime in or rebut my rebuttals. I know many people feel passionate about our current situation and what we should or should not do, but one of the greatest things we do have is the freedom to have these conversations.