Washington Mutual...what's next?

I posted this last week on WaMu:

Well, another shoe just dropped--the biggest bank failure ever. Washington Mutual was just seized over night, so good luck to any depositors with over $100,000 in their accounts. I'm going to guess there are many Californians, Floridians, New Yorkers, and Washingtonians who lost millions.

Hate to be the bearer of bad news, but this is getting ridiculous. I saw this coming a couple years ago, and adjusted accordingly, but my friends thought I was a doom and gloomer, when in hindsight, I wasn't gloomy enough.

So what's next? More bank failures, I assure you. Berkshire Hathaway's Warren Buffett (only the wealthiest man in the world), just mandated that one of their portfolio companies stop insuring any assets above the FDIC limit of $100,000. That should tell you something--get any amount over that limit out of there--now! Bank deposits, money markets, etc. are NOT the safe haven you thought they were. Check the capital reserves of your bank (banks are required to have reserve requirements to cover bad loans) to measure how healthy they are. I predict hundreds, if not thousands of banks will fail going forward. Heck, the biggest ones are failing before our eyes--expect this to cascade to other major money centers, as well as smaller regional banks. The Federal bailout programs may save some, but if they let big commercial banks like WaMu go under, and big investment banks like Lehman fail, should we have confidence that the local bank around the corner will be saved?

I hate to be an alarmist, but I can't in my conscious NOT give my opinions. As always, seek professional investment and tax advice from your investment advisor and tax advisor. But please, do your own research as well, because they are human and not infallible.

Looking further out, I predict General Motors will be insolvent within 18 months. Shareholders will be slaughtered. Their manufacturing costs are too high relative to their nimble competitors, and their obligations to fund the pension fund and healthcare will drive them to bankruptcy. Instead of building hybrids in the face of $5 a gallon gas, they continued to build gas-guzzling SUVs.

In between banks failing and American industry icons going under, everything else is Jim Dandy. :-) The economy will recover, but it's going to be a long time before things get better. I'm thinking we bottom out in 2010, which means we've got a few more years of pain.

Keep a cool head, stay the course, and tell your loved ones how much they mean to you.