Investors are now prepared to believe that politicians can ‘fix’ the economy after Wall Street’s recent bout of hari kari. So is it now time to get back into the markets? The answer depends on whether your prepared to brave the elements or not. Eric Fry says if you do, you should consider this one simple investing strategy.

No, you didn’t read that headline wrong. According to Forbes.com, the $700 billion price tag on Hank Paulson’s bailout plan for the US financial markets wasn’t based on “any specific data point.” It just seemed like a nice big number. This from Forbes, Tuesday:

In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.

“It’s not based on any particular data point,” a Treasury spokeswoman told Forbes.com Tuesday. “We just wanted to choose a really large number.”

– There really must be a financial crisis. John “the fundamentals of our economy are strong” McCain has suspended his presidential campaign to to return to Washington to work on the proposed $700 billion bailout bill of financial institutions before Congress.

– Meanwhile, McCain’s fellow Republican George W. Bush made a televised appeal for the swift passage the plan. He said the “entire economy is in danger” and warned of a “financial panic” and “a long and painful recession” if Congress didn’t pass the bill soon.

Lots of kids jump off of cliffs every day, simply because all the other kids are doing it. We call these cliff-jumpers, “portfolio managers.”Every single trading day, the nation’s portfolio managers leap from the precipice of prudence into the abyss of group-think and “closet indexing.” They leap because everyone else is leaping.

– Another day another bailout. At 6:30pm yesterday evening on Capitol Hill the government’s plunge protection due Hank Paulson and Ben Bernanke announced to lawmakers a plan to plunge $85 billion of taxpayers’ money into insurer AIG (NYSE:AIG) to prevent it from going under. In return, the government will take a 79.9% stake in the company.

– Interests of taxpayers “protected,” according to Fed statement. “Loan is collateralized by all the assets of AIG.” “Loan is expected to be repaid from the proceeds of the sale of the firm’s assets.” 

– “The US government will receive a 79.9 percent equity interest in AIG

The carnage on Wall Street can be put down to two toxins: leverage and greed. This was the view of Bank of America (NYSE:BAC) chief Ken Lewis, speaking on CNBC yesterday.

In other words, says Eric Fry at Rude Awakening, Wall Street could have avoided the whole mess by applying some restraint and foresight. It didn’t.

The lesson to be learned from Wall Street’s hubris, says Eric, is that although stocks can be ruined by over zealous management, commodities cannot. Stupidity is not a risk factor in the commodities sector. And this makes them attractive despite their recent selloff.  

Eric Fry in The Rude Awakening says Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) performed terrifying high-wire act in the way they did business. More terrifying was the public’s indifference to the companies’ profligate piling up of debt…

The Era of Peak Greed is over. The Era of Caution is upon us. The Rude Awakening’s editorial director Eric Fry, says the credit crisis has taught investors important lessons. Like how to avoid excessive risk. This is why Eric advises readers to stay away from bottom fishing in the financial sector. There’s too much complexity. Sell risk, buy caution. Sell complexity, buy simplicity, says Eric…