Henry Paulson bailed me out, but he may not be able to save the global financial markets

Sec. of the Treasury Henry Paulson bailed me out of some losing positions I had in the stock market last week when he introduced his two-and-a-half page proposal to save the global markets.

I came out smelling like a rose, thank you, Mr. Secretary, because the stock markets rallied sharply on the news of your proposal. As a result, several of my stocks that looked like losers to me early in the week turned out to be nicely profitable, and I sold them. Or more accurately, I let them be called when the call options on them expired Friday.

Earlier in the week, when it still wasn’t clear that you’d tried to bail out AIG and other holders of “toxic” mortgage-backed securities, I dumped four of my five banks at nice profits because I was afraid that they were about to swoon. I held on to my Wells Fargo (WFC) until the end of the week, and made a nice profit when it was called, thanks to the Paulson bailout proposal.

Today, some banks were down as much as 13% to 15%.

I sure was glad to be rid of my bank stocks by the close of trading Friday, because I feared, correctly, as it turns out, that Paulson’s bailout plan would meet a firestorm of criticism, second guessing and earmarks. I just knew the bail out couldn’t be so easy, and the more I read and hear about how banks and insurers and small speculators like me can be saved, the more difficult it looks.

The people who created the mess and made it worse over the last two or three decades, members of Congress, are the loudest critics and most important obstacles to meaningful reforms.

To be fair though. The markets showed their scorn for the Paulson plan and Congressional second guessers today when the Dow Jones Industrials plunged 373 points, or 3.3% and the Nasdaq lost 4.2%. I fear stocks will going much lower before this bear market ends.

And I don’t think either Paulson or Congress are going in the right direction with this so-called bail out. I’d rather see a law that forces all the companies holding toxic securities to suspend their dividends, raise capital by selling more stock and deny golden parachutes to the people who made the big mistakes that got us into this mess. I’d also like to see a few of the Congressional backers of Fannie Mae and Freddie Mac despite repeated warnings lose their seats. So much for wishful thinking.

The point is that little traders like me who are trying to build their retirement nest eggs are the real Wall Street. We’re the folks that own the 401ks, pension funds, mutual funds, exchange traded funds and stocks that Paulson is trying to save.

Yes, there are big money folks on Wall Street who’ve made big mistakes that have put all of us at risk.

But the politicians need to be careful to not punish us little speculators [investors] who had nothing to do with the mortgage bankers’ lending practices or Wall Street’s disastrous financial “innovations” that have us all wondering about our futures.

The only dumb thing we small speculators [investors] did was buy the wrong stocks and mutual funds. We bought the Bear Stearns, Lehmans, AIGs because they looked strong and profitable, not understanding the games they were playing. We counted on the professional money managers who manage our mutual funds to keep us out of trouble. Good luck with that.

We just wanted to make a buck like everyone else, and like the dumb smart guys on Wall Street, we made some big mistakes when we bought those stocks and believed that mutual funds can invest our money better than we can.

We’re all speculators. We’ll be punished for our lack of insight as speculators, but most “compassionate” people believe we don’t deserve to be ruined along with the Wall Street big shots who are losing their fortunes and reputations.

 

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