3. Pretty Yourself Up: Looks Matter

According to the Wall Street Journal, written when the Treasury’s final plan for nationalizing Fannie and Freddie was still taking shape: “Mr. Paulson is cautious about any plan that appears to benefit shareholders because he doesn't want the government to be seen as bailing out investors who for years profited from the companies' success.”

Following this line of reasoning, only equity holders, not bond holders, profit from a company’s success. Incidentally, Mr. Paulson doesn't appear to have included his subordinates at the IRS on that memo, as interest earned on bonds would presumably no longer be taxable under that theory.

That interesting theory notwithstanding, the lesson to be learned here is that in the political arena, just as in the "gentleman’s" clubs it resembles, appearances are what matter. Paulson and Bernanke will apparently only make it rain on those considered by the voting public to be necessary and productive.  So if you’re an equity investor in search of capital gains, you’re almost certainly out of luck.

The Return of the Helicopters

Last night’s $180 billion expansion in the Fed’s swap lines with foreign central banks seem to indicate that the helicopters have returned. But if Bernanke continues doing what he's been doing since he became Fed Chairman, any additions to the monetary base brought about by the new arrangements will be “sterilized” by the open market desk-buying Treasuries elsewhere and keeping the money supply relatively flat. 

For now, the only people receiving government bailouts are those shaking their moneymakers behind closed doors, but that could change. If the Treasury continues to weaken its balance sheet by assuming larger and larger amounts of debt issued by those who have made and continue to make bad decisions, it might eventually find itself insolvent.

At that point, the helicopters will assuredly take to the skies - and you won’t need any of the advice I’ve given above. No matter who you are, cash will be falling all around you.

The downside, of course, is that by that point it will all be worthless.