When US stocks dived following the passing of the bailout bill, President Bush sought to calm investors. He said it would “take a while” for the bill to take effect. Problem is George W doesn’t have much of time.

In less than one month, Americans will vote into office either Barack Obama or John McCain. Each has very different ideas about how to tackle the financial crisis.

Martin Hutchinson says Obama is most likely to win on a populist anti-Wall Street platform. But if he follows up this rhetoric with more regulation and protectionism, this could hurt US investors even more in the long run.

When Hank Paulson’s bailout bill tanked yesterday traders sold off US in a panic of epic proportions.

But Martin Hutchinson says the failure of the bill is a blessing for the economy. Propping up a rotten system will only reward failure and block creative innovation.

The worst case scenario now is that we’ll see the Dow slump to 5,000 points. This makes a defensive portfolio a must. Martin recommends invest in counter-market plays such as the SPDR Gold Trust ETF (NYSE:GLD) or the Rydex Inverse Gov Long Bond Strategy C (MUTF:RYJCX).

Despite the chaos on Wall Street, the Fed yesterday left its benchmark interest rate on hold at 2%.

Martin Hutchinson says the Fed has finally starting doing its job: putting price stability over Wall Street’s demands. Real interest rates are negative. This is feeding inflation. It also means Treasury bond yields - also currently below the rate of inflation - are too low and should begin to rise again.

Martin says investors can profit from this situation with the Rydex Juno Inverse Government Long Bond Strategy (MUTF:RYJUX).

– Lehman Brothers is doomed opines Bloomberg’s Michael Lewis this morning. Ironically, Lewis says Lehman’s (NYSE:LEH) fate is sealed because, following the government’s bailout of rival Bear Stearns, those who do business with Lehman don’t care too much if it stands or falls. The belief is the government will step in to pick up the pieces should Lehman fall apart.

The Bear Stearns bailout was supposed to prevent the crisis from rippling through Wall Street. Obviously it hasn’t done that. It’s merely thrown the crisis into slow motion and prolonged the agony.

Continue Reading

An inherited budget deficit of over $400 billion will tie the hands of whoever is elected president this November.

However, Money Morning’s Martin Hutchinson says a McCain victory would boost defense and Big Pharma stocks. And McCain’s VP choice, Sarah Palin, is a strong advocate of more drilling for oil, which is encouraging for domestic oil stocks.

On the other hand, McCain would likely hold onto Ben Bernanke as Fed chief. This would mean an extended period of low interest rates and painful inflation down the line.