While Jim Cramer and others are wringing their hands, the people I respect most are turning bullish.

At least, over the long term.

Let's start with John Bogle. (Doesn't it always start with John Bogle?)

Judging by the series of interviews he's been giving lately, Bogle is very worried about the U.S. economy. As he said in an interview with Forbes today (highlighted by Murray Coleman in our invaluable new daily news roundup), "it will be a year-and-a-half to two years before [the U.S. economy] turns upward."

That doesn't mean investors should be sitting on the sidelines. Far from it. Bogle says the market may be undervalued by about $7.5 trillion right now, and thinks that the market has likely over-discounted the impending recession.

Bogle's not alone. In the forthcoming January/February issue of the Journal of Indexes, Rick Ferri (a great financial advisor) calls this "the greatest opportunity in our lifetime" for

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Day after day we get continued evidence of a major policy mistake that is costly for the average investor with a retirement account. The Bush Administration, led by Hank Paulson, stepped in when faced with a crisis.  It was courageous and correct, even if the plan was a bit sketchy. When they finally got Congressional approval it included both additional powers and additional oversight.  Paulson used the additional powers to make direct investments in financial firms, something that many top economists and fund managers thought was a good idea.  This move took the "bulls eye" off of some of the top firms.  It was a good step for an immediate crisis. The Mistake It was at this point that Paulson's effort went off the rails.  We have listened and read everything on this topic.  From our perspective, as experienced observers of government, we think that Paulson ...

The Fed did nothing on interest rates today and their statement was unrevealing and perhaps was meant to demonstrate that they’re cool. However, they caught bears flatfooted with a subsequent report/rumor of an AIG bridge loan [see late-breaking news below]. The Fed has also injected $140 billion in the past 24 hours. I don’t know if that includes $87 billion to JPM who are being reimbursed for an advance to LEH to settle trades. A lot of this money goes to trading desks and you can connect the dots. Some say the Fed itself is the source of rumors and that’s part of their micromanaging strategy. But this line from Cool Hand Luke comes to mind: “Yeah, well, sometimes nothin’ can be a real cool hand.” Some say the Fed must save AIG since its collapse may ...

This past weekend saw the federal government bail out the mortgage agencies, Fannie Mae (FNM) and Freddie Mac (FRE). These two agencies combined either own or guarantee over $5 TRILLION worth of mortgages.

Why did the government step in? Because they had to! Over the past year, Fannie and Freddie have racked up a combined $14 billion in losses and write-downs. Both agencies, particularly Freddie Mac, were technically insolvent.

Foreign banks of all types, who own billions in Fannie Mae and Freddie Mac bonds, became aware of this. They became worried about getting paid back the value of those bonds when the bonds matured. These foreign banks told the US Treasury that unless something was done, they would immediately stop buying these bonds. That would have had devastating effects on the US mortgage markets.

So the Treasury acted. Both the common and preferred stocks of Fannie and Freddie are now nearly worthless. This

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Wednesday’s market action was filled with choppy price movements as Wall Street was trying to figure out if WM or LEH or both would go under that day.  LEH and WM are about to be worthless as traders continue to hammer the stock and Wall Street firms back away from both.  Bill Gross was on CNBC stating PIMCO still had LEH as a counterparty.  This is far from the truth, more than likely his firm PIMCO has a few termed trades that were put on back in March.  Technically, they are still a counterparty but he is hardly putting on new positions with LEH.  Washington Mutual (WM) continues to deal with bad loans and to no surprise they are about to be wiped out.  Yesterday’s action was merely an oversold bounce with volume coming in well below Tuesday’s level.  Again, this market is very sick and will continue to slide.

Do

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Now that American's own Fannie and Freddie, more than 1/2 of all U.S. mortgages are property of Uncle Sam.  How can this be good? Better yet, Russia holds about $75 billion of Fannie and Freddie securities, Luxemburg and Belgium hold $39 billion and $33 billion respectively. British investors hold about $28 billion of securities in the nearly doomed duo. Isn't anyone worried? All of us here at the Masters are in awe that the talking heads don't seem to be concerned about the long term impact about what went down this past weekend, what the hell is the U.S. ...

It’s a done deal. As I’m sure you’re aware by now, the Treasury Department announced the takeover of the mortgage giants Fannie Mae and Freddie Mac yesterday at 11AM. The details continue to emerge, but overall the basic terms are: The Federal Housing Finance Agency (FHFA) now runs to two companies. The Treasury is (temporarily) buying the mortgage backed securities of the two firms. Both firms will continue increasing their mortgage backed securities portfolios until 2010. Starting in 2010, both firms portfolios must be reduced at an annual rate of 10%. Fannie and Freddie’s CEOs are being replaced. These factors and others are being analyzed at length by commentators all over the Internet. Some of the more insightful are Barry Rithholtz at http://bigpicture.typepad.com/ and Mish Shedlock at http://globaleconomicanalysis.blogspot.com/. So instead of delving into the bailout itself, I’d rather focus on its #1 cheerleader, the investor who most ...

No, it wasn't Bill Gross from PIMCO talking his own book on CNBC and demanding an immediate rescue plan. The shocking truth of the sudden GSE bailout this weekend, after months of prevarication by the Treasury, was that it was forced upon a reluctant US government by the realisation that both Fannie and Freddie had cooked the books by hiding huge off-balance sheet liabilities (and I bet they're not the only ones). As a result, Morgan Stanley concluded in their review of GSE finances on behalf of Hank Paulson that both were dangerously undercapitalised and needed an urgent infusion of cash. The dumping of GSE debt by the Chinese and Russians among others has also hastened this decision. The equity markets may well see a knee-jerk relief rally on this historic intervention, but it will prove short lived I suspect, for several ...

A few odds and ends to chew on as we get ready for a whole lotta football (football starts here at 6 or 7am so I can take in a game and still have a full day out of the house which maintains marital harmony:->>)A reader left a comment several days ago that I have been meaning to answer, sorry for the tardy response. The reader said that alternative investments are supposed to zig when equities zag but lately the alternatives have gone down more than regular equities. My take on this may not be palatable but I do believe it should be viewed this way.Looked over the length of the bear market many of the alternatives have zigged. Over the last month many have given up the ghost. I have touched on this a few times in the past. If you can blend in some ...

Not that they need it because their business model is just fine thank you - but your tax dollars are on the way... this administration is infamous for doing their best bailout... err assistance ... plans on the weekend. I wonder if this was leaked to Goldman Sachs... err to someone, and that caused the reversal today. The Treasury Department is close to finalizing a plan to help shore up mortgage giants Fannie Mae and Freddie Mac, according to people familiar with the matter. Precise details of Treasury's plan couldn't be learned. The plan is expected to involve a creative use of Treasury's new authority to make a capital injection into the beleaguered giants. The plan includes changes to senior management at both companies, according to a person familiar with the plans. On Friday, a series of high-level meetings were planned between Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, the chief ...