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Your Post-Bailout Recovery Strategy

By Tobin Smith

Lately, I can't help but be reminded of the movie "Groundhog Day," in which Bill Murray's character has to keep reliving one of the worst days of his life until he gets it right.

And wrapping your head around the surreal financial times we're currently living in is no easy task, but sometimes the best way to understand transformative change is with a metaphor.

There is no shortage of metaphors in the news for the happenings on Wall Street. I'm partial to sports metaphors, so try this one on for size:

Yankee Stadium just ended its 85-year run, and the team will begin the 2009 season in a shiny, new stadium, just as Goldman Sachs (GS) and Morgan Stanley (MS) gave up their investment bank status and are turning into regulated banks.

Or perhaps we could liken the government's bailout plan to the U.S. Ryder Cup team, which emerged victorious for the first time since 1999, thanks to a fresh strategy for selecting team members.

Maybe the message in that one is that, with time, all defeats can be overcome -- eventually. Often an innovative strategy is as important to the outcome as the execution.

While I'm not trying to wax philosophical in today's rant, I want to share something President Franklin D. Roosevelt said after he declared a bank holiday to stabilize the nation's banking system in 1933.

"The rulers of the exchange of mankind's goods have failed, through their own stubbornness and their own incompetence. They know only the rules of a generation of self-seekers.

"The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths."

It seems that what is old has become new again. Let's just hope that the outcome is better this time around.

A ChangeQuake of Massive Proportions

During the past few days, we lived through one of the greatest transformative economic events -- or, as we call them, ChangeQuakes -- since the Great Depression.

Let's assume that we see:

1) A government bailout of the residential and commercial real estate industry to the tune of $700 billion approved in the next five to 10 days;

2) A structural change in the $3 trillion money market fund world; and

3) The complete transformation of the investment banking world to a commercial bank model, a la Goldman Sachs, Morgan Stanley and Merrill Lynch (MER).

Combine that with the nationalization of AIG (AIG), Freddie Mac (FRE) and Fannie Mae (FNM) -- not to mention the fact that it's anyone's guess what will become of Washington Mutual (WM) and Wachovia (WB) -- and the federal government's stake in the financial services and real estate bailout will be more than $1.5 trillion. That's equal to more than 10% of our annual GDP!