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Keep US in US Hands


No bailout means more foreign ownership of America.

Yesterday, when New York Senator Charles Schumer suggested the rescue package start off with $100 billion to test the waters and to mitigate risks he suggested that a "piecemeal" approach made sense.

I looked at Ben Bernanke's face and felt he was thinking "$700.0 billion is piecemeal: You would fall off your chair if we told you how much we might really need."

Minyanville's Why Wall Street Will Never Be the Same I say that quasi-tongue-in-cheek, but the fact is I think the entire package could eventually cost up to $1 trillion. One aspect of the present situation few are willing to bring up is the fact that if we allow our largest banks to melt down, more than likely their new owners would be international investors. I try not to be xenophobic: I feel I this is a national security issue. If the bulk of money flowing through the US financial system is controlled from abroad it would mean the lost of sovereignty.

Then you will find your servant is your master
And you'll be wrapped around my finger
You'll be wrapped around your finger

- The Police

US and Foreign Cross Boarder Investment Trends

I know we've heard all of this before and the fact is foreign investments in the United States have been trending higher. I think global investment should be a two-way street but there is obvious concern when the industries in question are defense and financials: They are, after all, different than a beer company no matter how near and dear the latter may be to our hearts.

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Sure there are measures in place to limit ownership in our banks but the point is would we want all the banks to trade at multi-year lows with their very existence in question. Of course, there's the notion that no matter how much pain and suffering occurs, it's all for the long-term good of the nation. The thing is that most people that who feel that way don't think they'll be among those suffering.

On a related note, even with the weakening dollar, America has made more investments around the globe than have been made by the rest of the world into the United States.

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CRS Report for Congress

Coming into the week I thought there was a 95% chance of a rescue compromise by Friday but I think the possibility of a deal has dropped considerably. At this point we have to brace for the worst.

Ironically, it seems like the market may have come to grips with this reality, too. Interestingly enough, the market didn't' tumble, even with this obvious development.

Does this mean investors are willing to sit tight and see what happens without intervention? Last week it became clear to most (including me) that a deal had to happen ASAP. Now it doesn't feel like Armageddon begins Friday at the opening bell. It may still happen, however. But it would be wild if somehow there was the (ultimate) head fake and the stock market didn't plunge. Wistful thinking to be sure, but one has to wonder why there wasn't a bigger selloff yesterday.

I guess professional bettors would still bet on a deal being cobbled together, although the mythical Friday deadline is in jeopardy. With that in mind, remember that investors wouldn't be buyers so selling could snowball.

I'm still worried about Congress turning this rescue package into a personal soapbox to push agendas that could be addressed later. Everyone is on board with cutting executive pay, but the debate and vitriol over this issue underscores how misguided so many of our lawmakers are, even if they are only voicing the opinions of the people.

The bloodlust and desire to tar and feather anyone in a suit is worrisome. We are so busy dispensing mob justice that a lot of folks are forgetting the ground beneath their feet is bubbling with Chernobyl-like heat.

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No positions in stocks mentioned.
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