From Swinging to Investing: A Money Making Experiment……….(click here for home & most recent)

“Henry Paulson buries U.S. Toxic Debt.”  So much has happened in four days.

The SEC also gave new flexibility to the accounting departments at banks with bad housing assets, allowing them to use their own judgment when assessing value.  Up until now, banks had to assess the value of these properties against similar properties on the market- called the “mark-to-market accounting rule”.  Now, banks can assess value based on what they feel a property may fetch when times are good again.  This new rule, or lack of a rule, caused the stock values of regional banks like National City (NCC) and Huntington Bancshares (HBAN), who have a ton of bad properties on their books, to make consistent gains this past week. 

President Bush signed the $25 billion loan to the US automakers this week to transform their old factories into green-auto producing ones.  This did little to the stock prices of Ford (F) and General Motors (GM).  “When the country gets a cold, Detroit gets the flu,” they say. 

The Senate devised their own bailout plan that included a bunch of tax breaks to keep the republicans happy, and passed it to the House.  This bailout plan differs from the one originated in the House of Representatives by a few key points:

Temporarily raising the FDIC insurance cap to $250,000 from $100,000

Allowing the FDIC to borrow from the Treasury to cover any losses that might occur as a result of the higher insurance limit

Extending tax breaks to individuals and businesses using renewable energy, and giving a deduction for the purchase of solar panels

Offering relief for another year from the Alternative Minimum Tax

Added to the bill this time around were tax $150 billion exemptions for wooden arrow and rum manufacturing. 

What?

The House stamp approved the bill yesterday, and immediately afterwards, the bottom fell out of the Dow- again.  News that 159,000 jobs were lost in September, the unemployment rate has held at 6.1%, and an overall skepticism of the potential effectiveness of the bailout plan all caused people to sell into the fire. 

President Bush signed the $700 billion bailout bill into law today. 

Because the bill was passed, the short-selling ban, which was originally set to expire on October 2, but then was extended until October 17, will now expire on October 8- the third day of the bailout bill’s enactment. 

What seemed like a done deal between Citigroup (C) and Wachovia (WB), was undermined my Wells Fargo (WFC), who swooped in stole the show with a $15.1 billion bid.  Citigroup is going to contest, but this didn’t stop Citi from losing 18% yesterday.  Wachovia, on the other hand, gained over 50%. 

Oil has been creeping around in the background, closing at $93.88 on Friday afternoon.  At one point, the Dow was up over 280 points yesterday, but then freefell to close down 157 to $10,325.