Since American taxpayers own 80% of AIG, the primary sponsor of the largest sports franchise in the world, can we call it "soccer" now.

"I've never seen a panic like this," said David Wyss, chief economist at Standard & Poor's. "I've seen stock market drops, but not an overall panic."

(HT: RobinsonandLong.com).

If everyone knows it is a "panic" and not a correction based upon looming recession, then the panic-driven selling must be close to an end as rational investors assess the basic facts that companies like IBM posted great numbers, companies like Apple keep unveiling amazing new products at very attractive prices and American innovation keeps throwing up new goods and services.  The Washington Post can put out nonsense stories like "The End of American Capitalism," but even an enormous loss of wealth gained over five years is only that and not a repudiation of laws of supply and demand or the marvelous effects of liberty on markets, and of course the eventual and widely expected rebound will erase some of that loss.  There's an enormous amount of cash on the sidelines waiting to enter at the perceived "bottom," and not eager to miss the expected dramatic move up, and that will be just the beginning of a recovery in share price for most of the companies that are still doing in October what they were doing in August.  As Victor Davis Hanson noted this morning: "Sometime in the next few days, wiser investors should see that trillions of global dollars are now piling up and could begin to prime the economy — and that still valuable stocks, for a brief period, are up for sale at once-in-a-lifetime bargains."

These basic truths are hard to keep at the front of mind when expectations are shattered, but this is the fourth time I have watched this in 20 years --1987, the dot.com meltdown, after 9/11 and now this.  Each time American capitalism came roaring back.  There are lots of bank failures out there, but lots of banks are very, very strong as well.  The Fed and the Treasury are flooding the zone with credit and will continue to do so.  Inflation may be a problem down the road, but deflation doesn't look like a realistic possibility.

There is also a new economy humming along powered by millions of highly connected Millennials doing business in new and very different ways.  I know a number of them, and most of you do as well.  They are outside of old structures and busy designing an economic future.  For them, the collapse of stock prices is the greatest investment opportunity of their young lives since they can buy their first shares at these ridiculously low prices.  Those of us who invest every month are in fact going to get some greatly discounted shares for a bit, and when the market recovers, please remember that.

Finally, if you haven't yet read Walter Russell Mead's "God and Gold: Britain, America and the Making of the Modern World," now would be a great time to do so.  If you have read it, reread it.  Here is one key paragraph from Mead's opus:

This Promethean drive to acquire all the power that can be acquired, to do everything it is possible for humanity to do, to learn what can be learned, to build what can be built, and to change what can be changed is the force that impelled the three maritime powers to their global position.  Societies that grasp this dynamic and embrace it become wealthier and more powerful; those that reject it or fail to handle its challenges become weaker.  Within societies something similar happens: the more dynamically oriented individuals, regions, institutions, and industries tend to gain power at the expense of those who prefer a slower and safer path.  The unique hold role of the Anglo-Americans in modern times stems in part from the way in which these societies have come to believe that dynamism is their tradition: that they honor the past and acknowledge their roots by pressing on into the future.

Not many Americans are thinking about "pressing on into the future" today, but they will be next week or next month.  (In fact, enough of them might so carefully consider the future to give Obama a huge shock at the polls.)  A NASCAR nation loves its fast economy, but as with fast cars, there are some spectacular wrecks along the way.  We are watching one right now.  At its conclusion --which may have already arrived, we just can't know-- a shaken crowd will exhale, fret a bit and mourn the real damage, and then look forward to the next race.  "Gentlemen, start your engines" will mark all of 2009, no matter who is president.

I wonder how many web star-ups launched this week?  LawStudentCafe.com did, and probably a few thousand others.  More will follow next week, and in ten thousand industries many hundreds of thousands of engineers will continue to innovate and design.  Yes, the Christmas sales season will be slow, and car sales awful, but one thing is certain --Americans will be buying cars for a long long time. There are lots and lots of newly unemployed investment bankers, and most of them are enormously talented folks who will now take that talent away from banking and into the American economy at some other point.  Think of the seeding that is going on in front of us.

The underlying American commitment to building and growth isn't going anywhere, and even if Obama wins and the Democratic majorities expand, the government can only hinder not ruin the deeply rooted American desire to grow and improve.  If the fanatics among our enemies think to strike at America or its allies, they will be quickly be reminded that stock prices have very little connection to the ability to project American military power.  In short, the Greatest Generation did much more than win World War II.  It rebuilt a country capable of absorbing very hard hits and recovering quickly with a dynamism that astonishes every time. 

We saw that in 2002 and 2003, and we will see it again in 2009 and 2010.

And perhaps even in the closing months of 2008.  Perhaps even in the closing weeks of this election.

When days like yesterday happen, I always go back to the advice I got years ago as a teenager -- save and invest for the long term, avoid the emotion of the short-term, don't buy what I can't afford, avoid debt and adjust my investment risk taking downward as I get closer to my desired retirement date. Pretty much basic Dave Ramsey advice.

A 770 point drop in the DOW is certainly nothing to ignore but it's important to remember that on a percentage basis, it is was only 7% (Oct 1987 was over three times that and you can hardly detect the crash on a 75 year chart).  The DOW is where it was three years ago -- it's lost some value against inflation -- BUT it hasn't seen some sort of catastrophic drop either.  Yes, a trillion dollars of market value was lost yesterday, but it's a trillion dollars of market value that didn't exist three years ago before the market jumped 4,000 points during the housing crisis.

And the market has gained back over 37% of the trillion dollars by 10:30am...

The First Bank Run of the Non-Bank Bank Era
by Clark S. Judge
 
According to a late night email from the House GOP leadership, floor debate on the financial rescue bill may begin as early as 8am Eastern Time and will be limited to three hours.  So the House will almost certainly be discussing the bill by the time this column is posted.
 
No one needs to be told that this is unpopular legislation.  As of early last week, Rasmussen found a large plurality of Americans (44 percent) opposed to it, with only 25 percent in support. Opinion was moving against the proposal, and probably still is.
Read More...

WASHINGTON, DC – U.S. Congressman Mike Pence sent the following letter to his colleagues today in opposition to the deal struck last night on the bailout of the financial services sector:

Dear Colleagues:

Our nation has been confronted by a serious crisis in our financial markets. The President and this Congress were right to act with all deliberate speed in addressing this crisis.

We now have a deal that promises to bring near-term stability to our financial turmoil, but at what price?

Economic freedom means the freedom to succeed and the freedom to fail.

The decision to give the federal government the ability to nationalize almost every bad mortgage in America interrupts this basic truth of our free market economy.

Republicans improved this bill but it remains the largest corporate bailout in American history, forever changes the relationship between government and the financial sector, and passes the cost along to the American people. I cannot support it.

Before you vote, ask yourself why you came here and vote with courage and integrity to those principals.

If you came here because you believe in limited government and the freedom of the American marketplace, vote in accordance with those convictions.

Duty is ours, outcomes belong to God.

We have fought the good fight. Now we need to finish the race and make sure that posterity and the American people know there were conservatives who opposed the leviathan state in this dark hour.

And if you do this I promise you, I will stand with you and, I believe with all my heart, the American people will stand with you as well.

MIKE PENCE

A guest column on the financial crisis:

A Wall Street Rescue that Makes Every Player a Winner
By Clark S. Judge
 
With the Wall Street rescue talks on the ropes, there is a deal waiting to be done that fixes the Paulson Plan’s problems and gives each key player a win.
Read More...