Unintended Consequences

Calm.

That was what Henry Paulson and Ben Bernanke had in mind when they unveiled the financial bailout. People would stop fretting, credit would loosen and the economy would rebound.

Instead, the proposal has brought the largest amount of befuddlement I have ever seen in the financial markets. I watched people criticize the plan on television. One blog I read asked why the Fed just doesn't devalue the dollar now. Other sources took a wait-and-see attitude.

The Do-Not-Short List is causing some unexpected surprises as well. Yesterday, the Wall Street Journal reported that Express Scripts (ESRX - Snapshot Report) was on the list. ESRX is a pharmacy benefit manager.

Meanwhile, Congress is quietly working on an emergency spending bill to prevent the U.S. government from shutting down. And, as typical for late-session appropriation bills, the legislation is likely to have quite a bit of pork. Certainly, Paulson wasn't thinking about creating a smokescreen for this, but that is exactly what has happened.

So, what does all this mean to you?

As a taxpayer, do not expect a tax cut anytime soon. Given John McCain's history as a deficit hawk, it is within the realm of possibilities that he could raise taxes if he were to be elected ($700 billion is a lot to make up for with just budget cuts). Barack Obama has already stated he wants to roll back the Bush tax cuts.

As an investor, keep researching stocks. The current market environment has growth stocks like Chinese Internet firm Sohu.com (SOHU - Analyst Report) trading at surprisingly low valuations.

Even if you don't want to buy any stocks right now, you should keep your shopping list ready.

I know many of you are nervous. It is not an easy time to be an investor. But, rest assured, we will get through this uncertainty and when we do, the research you do now will help you take advantage of the rebound when it finally occurs.

One final bit of advice. If there is money you will absolutely need within the next 12 months, you have two safe options. You can put into a FDIC-insured bank account, which will protect you up to $100,000 per account. The other, if you don't need money in the next month, is to buy short-term Treasury bills. You can purchase them directly from the Treasury Department.

Read the full analyst report on SOHU.