This from Taipan Daily:

Last week, I wrote to you as to how our local hausfraus had found a convenient way to raise funds without the trouble of visiting such sordid places as pawnshops. Their solution: gold-selling parties wherein nice men would come to the house and relieve them of their excess jewelry.

Apparently the need to convert baubles to dollars is not limited to the Maryland upper middle class these days. According to Bloomberg, the pawn business is…

Really, just one quote from the company says it all.

“Even if GM implements the planned operating actions that are substantially within its control,” the report says, “GM’s estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business.”

The company goes on to say it will take a significant economic turnaround, strong proceeds from an asset sale, and/or government intervention for even a chance at having the cash flow it needs to survive through next year.

It does not…

This from Taipain Daily:

For the last 25 years, Soros observes, the “motor of the world economy” has been the American consumer. And not only has the American consumer been aggressively consuming, he “has been spending more than he has been saving.”

“So that motor is now switched off,” says Soros. “It’s finished. It’s run out of — can’t continue. You need a new motor.”

The declines of that truly awful week when the…

Though I think Congress should consider alternative plans, yesterday's press conference showed that it is still questionable as to whether there is enough support to pass the proposal. The inclusion of pet projects and special tax breaks showed that some Senators needed to be persuaded to support the bailout. Speaker of the House Nancy Pelosi is against changing the bill before vote, so it will be interesting to see what House Republicans choose to do. (A vote should start soon after this column is published.)

Rate Cut Coming?

On Friday morning, there was scuttlebutt about several central banks cutting rates on Monday morning. While I won't argue against a rate cut, I am skeptical about whether doing so will help much.

Still, I would give credit to policy makers for trying something to avoid the economic slump from worsening.

Focus List Strategies

Waiting does not mean investors should ignore the markets, however. Conversely, the current environment requires a proactive stance.

We're continuing to research new investments for the Focus List. I've got a notebook with names that I am considering after we discover what the fate of the bailout bill.

Right now, I'm seeing share prices of fiscally-sound companies dropping significantly. Though painful, the current environment provides a really good opportunity for long-term investors to look.

That said, there are real short-term risks to buying stocks right now. This is why we are being slow to add stocks to the Focus List and the Growth & Income portfolios. Rest assured, however, we are looking at candidates. And you should have a shopping list ready too.

Do I know when the best time to buy will be? No, and neither does anybody else. However, the alternative of just sitting out of the market means missing out on what could be a large rebound rally. The bad economic news is being priced in; it's just a matter of when, not if, the markets will recover.

Timely Buys List

Due to the current market conditions, we will let the Timely Buys List fall below our preferred size for the portfolio.

Our performance guidelines call for a minimum of three positions to be held in the Timely Buys List. In such instances, our performance guidelines use the following allocation strategies:

• 3 stocks - 100% allocation to stocks
• 2 stocks - 66.7% allocated evenly between both stocks, 33.3% allocated to cash
• 1 stocks - 33.3% allocated to the stock, 66.7% allocated to cash
• 0 stocks - 100% allocated to cash

We do not like letting the portfolio have 3 or fewer stocks, but we're choosing prudence over portfolio size right now.

The Markets

The new level of support for the S&P 500 is 1,106.39. This was the close on Sep 29 and it was not tested yesterday.

The VIX continues to trade at high levels, as many traders and portfolio managers opt for put options. Some construe this as a sign that we are at a bottom.

There is a very real flight-to-quality occurring. This can be seen in the performance of Warren Buffett's Berkshire-Hathaway (BRK.A), which has been climbing.

So why aren't we adding it? Because the Class A shares trade at about $115,000 and the Class B shares trade at $4,600. There is also the risk that these shares could fall when a rebound occurs, as the money flows out to other sectors.

Keep Looking At Stocks

I know my commentary has not exactly been positive, but I'd rather give you the facts than provide false optimism.

This said, the economy will recover and stocks will find new highs. The economy goes through cycles, with recessions typically being considerably shorter than periods of expansion.

The best thing you can do is keep researching stocks. This is what successful investors do. We'll help get you through it by finding fundamentally sound stocks and giving you the tools necessary to do your own research.

Charles Rotblut, CFA, is the Senior Market Analyst for Zacks.com. He can be reached at crotblut@zacks.com.
"BKHT" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

Discussions over the government bailout of the financial markets stalled late Thursday, when House Republicans said they would not participate in the passage of Paulson’s deal.

"At the end of the day, it’s a $700 billion bailout," Rep. Scott Garrett (R-NJ) told USA Today. "It puts the taxpayers on the hook."

A bipartisan group of negotiators Thursday expressed hope that a deal would pass sooner rather than later after discussions with Secretary Paulson led to an agreement in principle. That framework included $250 billion in immediate relief with another $100 billion available without congressional approval. The remaining $350 billion would be made available later with approval from congress.

The plan also included caps on compensation for company executives, which Paulson initially opposed. Rep. Frank on Sunday referred to lavish executive salaries and bonuses as a "perverse incentive" that encourages executives to take inappropriate or excessive risks in exchange for multi-million-dollar payouts, and therefore, part of the problem.

Paulson finally agreed yesterday, stating that “the American people are angry about executive compensation and rightfully so. We must find a way to address this in the legislation.”

Stock warrants, which would provide the Treasury with equity stakes in participating companies, were also included in the agreement.

“Right now the price of admission [to the proposed Treasury program] is zero,” Sen. Jack Reed, D-RI, said Tuesday. “It’s not inappropriate to demand that if they benefit from this transaction in the future … that they will share that benefit with the taxpayers who made the benefits possible."

After a late night meeting on Capitol Hill, however, it became apparent that House Republicans would not support Paulson’s plan, regardless of the stipulations.

House Financial Services Committee Chairman Barney Frank said no House Republican took part in negotiations, but that Rep. Spencer Bachus (R-Alabama) made a brief appearance to deliver a one-page statement that outlined the House GOP plan.

The GOP plan involves the creation of a mortgage-backed securities insurance fund, Bloomberg News reported. The holders of mortgage-backed securities would be charged premiums to finance this insurance. According to the plan’s outline, Wall Street participants would be forced to fund their own bailout by injecting private capital, which could be raised, in part, by suspending dividends. Measures such as these would be facilitated, the Republicans said, by the removal of “regulatory and tax barriers that are currently blocking private capital formation.”

The Republican plan also requires participating firms to disclose the value of mortgage-related assets currently on their books, a review of credit rating agencies, and an audit of failed companies to ensure their financial position was accurately portrayed.

After being confronted with stiff opposition from members of his own party, President Bush said in a speech Friday morning that he was optimistic a rescue package would be passed soon.

“There is no disagreement that something substantial should be done,” he said. “We are going to get a package passed. We will rise to the occasion.”

While Democrats hold a majority in the House of Representatives, Speaker of the House Nancy Pelosi has made it clear that she will not agree to a bill without the full support of Congress.

After talks at the White House crumbled Thursday night, Treasury Secretary Paulson reportedly knelt down in front of Pelosi and pleaded with the house speaker to not “blow up” the deal by withdrawing her party’s support.

“I didn’t know you were Catholic,” Rep. Pelosi reportedly retorted in reference to Paulson’s kneeling. She went on: “It’s not me blowing this up, it’s the Republicans.”

A comment, to which Paulson responded with a sigh saying: “I know. I know.”

Source: Republican Opposition to Paulson’s Bailout Plan Stalls Talks

By midnight, it was hard to tell who had suffered a worse evening, Bush or McCain. McCain, eager to shore up his image as a leader who rises above partisanship, was undercut by a fierce political squabble within his own party's ranks.

The consequences could be worse for Bush, and for millions of Americans if the impasse sends financial markets tumbling, as some officials fear. Closed-door negotiations were to resume Friday, but it was unclear whether House Republicans would attend.

Now that all five big investment banks -- Bear Stearns, Merrill Lynch, Lehman Brothers, Goldman Sachs and Morgan Stanley -- have disappeared or morphed into regular banks, a question arises.

Is this bailout still necessary?

The point of the bailout is to buy assets that are illiquid but not worthless. But regular banks hold assets like that all the time. They're called "loans."

With banks, runs occur only when depositors panic, because they fear the loan book is bad. Deposit insurance takes care of that. So why not eliminate the pointless $100,000 cap on federal deposit insurance and go take inventory? If a bank is solvent, money market funds would flow in, eliminating the need to insure those separately. If it isn't, the FDIC has the bridge bank facility to take care of that.

Next, put half a trillion dollars into the Federal Deposit Insurance Corp. fund -- a cosmetic gesture -- and as much money into that agency and the FBI as is needed for examiners, auditors and investigators. Keep $200 billion or more in reserve, so the Treasury can recapitalize banks by buying preferred shares if necessary -- as Warren Buffett did this week with Goldman Sachs. Review the situation in three months, when Congress comes back. Hedge funds should be left on their own. You can't save everyone, and those investors aren't poor.