Bailout Passes Senate: Start Your Engines… or?
The Senate passed the Paulson Plan (modified, of course) by an overwhelming majority Wednesday night.
The revised bill contains an increase in the FDIC insured limit from $100,000 to $250,000, ensuring that both presidential candidates can take credit for it. It is, no doubt a long overdue provision, but it was not the idea of either of them.
The bill will move on to the House, where it failed earlier. With such strong Senate approval, the bill will likely pass, despite strong public opposition.
In any case, the markets are poised to rise on this news. The bailout is good news for Wall Street, even if only for a short time.
Long term investors and those nearing retirement will want to look at this as a bup in the road, a bump upward. It may be best to look at strength in the market as a selling opportunity, or a short opportunity.
With the late night and weekend announcements made over the past few months, it is becoming increasingly popular to time the market with short funds, like ProShares Ultrashort S&P 500 (SDS and UltraShort Financials (SKF).
When good news like the Senate passage happens, financials, and the market in general, are bound to react strongly, sending short-focused ETFs downward.
Whether the underlying problems in credit and the economy in general are solved, however, remains a question: what if $700 billion isn’t enough?
There’s a lot of upside to this bill’s passage, but there’s a lot of downside in its wake.
Not professional advice, just some food for thought.