Our 2008 Investments

By Jason Ibrahim

For the last couple months, conventional wisdom has indicated that now is the best time to invest in the stock market. Fortunately, you and I have jumped in with both feet, buying up stock in American industry like it's going out of style. Buoyed by the rays of optimism from our fund managers, we have determined that, recession or not, we're going to get our money's worth, and then some. So what's the problem?

For starters, we should have read the prospectus more carefully. There are lots of good investments out there, but you can avoid the ones labeled Fannie Mae, Citigroup, Ford, General Motors and Chrysler without losing any sleep. (While the last three have not yet occurred, I think it's fair to assume they will.) As Pennsylvanians (and, doubly, Blair County residents), we can soon add Boscov's to our investment portfolio. What do all these companies have in common? We purchased stake in them only after (or at the precipice of) their spectacular failures. We loaned money only to the companies who showed they are incapable of handling it.

This might not be so bad; buying up stock at fire sale prices--then making a killing from it--could be very lucrative, but to have this risk foisted on us by officials who claim to protect our best interests is ludicrous. If I had intimate knowledge of Citigroup's inner workings and wanted to take a chance on them, that's great--but I don't see why my next-door neighbor needs to jump on the bandwagon as well.

To see the alternative, let's take the auto industry as a case study. As Connecticut Senator Chris Dodd said the other day, "We cannot lose the automobile industry in America. That cannot happen." While his thinking is right, it's also incomplete. For one thing, if the Big Three curled up and died tomorrow morning, the US would still have an auto industry. For over a decade now, foreign automakers like Honda, Toyota and Nissan have been moving their production and design operations into the US, in places like Tennessee, Alabama and Ohio. Also, if the Big Three simultaneously filed for Chapter 11 tomorrow, I would be surprised if Honda, et al, didn't rush in, buy their operations and equipment, and employ significant amounts of their workforce, which negates the unemployment impetus for the bailout frenzy. Finally, the Big Three's sales numbers have for some time sent a clear message: they're dead (here, here and here). It's not heroic of Congress to try to prop up the corpse and buy it a $14 billion lunch.

As always, that's just my opinion. How about yours?