Who's the Government Bailing Out?

Written by Nathan White, CFA

photo by KaCey97007

Volatility continues...

"Tread carefully" is the mantra for this market.

One day you are tempted to sell everything and run for the hills, and the next day you can't believe what a great buying opportunity this is.

In this environment you want to identify quality assets and let the price come to you and do it in small increments.

Placing a large bet can lead to quick insolvency and many are tempted to put too much capital at risk. On the other hand if you don't buy anything as the market goes down you are also throwing away tremendous opportunity.

I'm torn on the current government bailout.

It could save us from a market meltdown, but who is to say that the market would meltdown anyway? Maybe then we would be done with this and we wouldn't need a bailout.

On the other hand, a bailout will come at significant cost which will have to be paid no matter what. If it saves the market in the short term it can only come at the expense of long term prosperity.

It is just like selling a call or buying a protective put on the economy or our standard of living -- both protect on the downside, but limit the upside potential.

That may seem desirable in the short term, but we will definitely feel the frustration in the future as we strive to increase our standard of living, and the efforts seem to bear no fruit.

Paragon Wealth Management, a wealth management firm in Provo, Utah, is a provider of managed portfolios for individuals and institutions. Although the information included in this article has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy. All opinions and estimates included in this article constitute the judgment as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.