So first, what is an IPO?

Every company that trades on an exchange such as the New-York Stock Exchange or the NASDAQ, has at some point or another, gone through an initial public offering.

99.99999999999999% of all companies start out as privately held. Maybe there was a founder and a group of private investors that all went in together or something. You can learn more about this kind of financing here. But eventually, those initial financiers want to get their money back. They have a few options, but they basically boil down to selling to some other private investor or selling to the public. Selling to the public is the IPO.

When you go public, you will usually hire 1 or more investment banks to underwrite the IPO. The investment bank will evaluate how much your company may be worth, and then goes and finds investors for you. These investors are not you are me, they are usually institutional investors with enough money to plop down millions of dollars worth of shares. They get the initial allotment of shares and then on the first day of trading these are the shares that go up for sale for buyers such as you or me.

But why would a company go public?

This is why it’s best to explain IPOs in the context of a company actually doing it. IPOs are not just a way for initial investors to exit the company, they’re also a way to raise money to continue the company’s operations. Tesla has been bleeding cash from the very beginning. Its founder made his millions selling PayPal to eBay. And he’s thrown many millions back into Tesla to keep it alive. He’s learned why the auto business is second only airlines in the “industries only a idiot would start a company in” category. Through himself and other investors, they financed the development and production of their first car, the sexy Tesla Roadster (pictured above). It starts at a few ticks over $100k. But the Tesla team knows that in order to put their all electric car company on the map they need a car that more favors the masses. So they designed the Tesla Model S (pictured below).

But getting this car to the masses is going to take some serious development money. And even though they’ve gotten some investments from a couple of car companies, and a nice chunk of cash from the government, they don’t have enough. So this is where the IPO comes in. It allows Tesla to raise cash from people that they don’t have to pay back. The stock could go to $0 and they go bankrupt. It’s unlikely, but it could happen. IPOs are great ways to raise cash.

There are other reasons for doing the IPO as well. It’s kind of a coming out party. It gets you a lot of press, and you now have to power spread out over many more investors and the CEO is able to maintain some extra level of control (sometimes). In this case the CEO is actually going through a divorce as well. He needs to cash in some of his Tesla stock to pay the settlement no doubt.

There are some concluding questions I’d like to answer as well. How does the investment bank get paid? Their job is to drum up interest and the more interest there is the higher the share price will be. They get a cut of each sale. So if Tesla sells for $18 a share, maybe they take $2 of that. Spread that out over tens of millions of shares and you have a nice cut at the end of the day. Also, how does a stock perform in its first few days of IPO. There are a lot of articles on the web you can Google about this, but more times than not, the stock takes off in the first few days due to intense demand. But there are some studies that show after a few years it tends to fizzle out and stay flat. I’d recommend that individual investors stay away form IPOs because they are risky. Especially for a company like Tesla which has never turned a profit. Do what I do, buy IPO stocks through fantasy trading. I bought TSLA and it’s done good things for my fantasy portfolio.

So that’s an IPO, I want to take a minute and talk about Tesla though too. I’m really excited about this company. As I said before, it’s been a long time since an American car company has done an IPO. And to top it off it’s an all electric company named after the awesomest dude you’ve never heard of. If I had the money, I’d already own a Roadster and would be on the waiting list for a Model S when it goes on sale (in 2012 I think). I love when startup companies take on the big guys. I can’t wait for the day that electric cars are the norm.

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My parents used to be classic examples of exactly how not to buy a car. They’d wait until there was something wrong with their current ride and go down to the dealership. Trusting as they are, my parents assumed car salesmen had their best interests at heart. I don’t know what my dad paid for a minivan when I was a young teen, but the circumstances were not good. Thankfully they have enough fiscal constraint to buy cheaper cars and can easily afford every car they’ve owned. Even paid cash for the last two. But most people are the combination of the classic customer and poor with money, so I want to give a simple, no nonsense guide on how to buy a car.

Step 1: Unless you get a subsidy from your employer, there will be no leasing. No way, no how.

Step 2: Figure out how much car you can afford. This is easier than it sounds. If you’re planning on keeping this vehicle for a while simply take your salary and divide by 2. That’s how much car you can afford. If you make $50k then you can afford a car that costs $25,000. If you’re married, take your total family income and divide by 4. If your family makes $80k, then you can afford a car that costs $20,000 (because you have to buy twice as many cars, so if you were buying 2 that day you could spend a total of $40k). When it comes to trade-ins, don’t factor this into what you can afford. The car you can afford isn’t just about making payments, it’s about buying a car that fits your lifestyle and income range.

Step 3: Go to websites like Kelley Blue Book and Edmunds and learn how much your trade-in is worth. Take that number and divide by 2 because that is what the dealer will offer. Consider private sale or to another dealership like Carmax.

Step 4: Go shopping! Go find out what kinds of cars are in your price range that you’d be interested in. Test drive as many as you want. Don’t worry about taking business cards or giving out phone numbers, you won’t be buying a car the same day you test drive. Once you have a few you like go research things like reliability, gas mileage, blah blah blah. By the end of this step you should know the exact car you want. Do not go to any more steps until you know the exact car you want.

Step 5: Go to the manufacturer’s website and get the websites of the nearest 10 or so dealerships. Depending on where you live you could increase or decrease this number as needed. I pulled up anything withing about 90 minutes of my place.

Step 6: Find the contact information for the internet sales department. Many websites use contact forms but others will use email addresses. Give your contact info (WITHHOLD YOUR PHONE NUMBER!!!!) and send a message to the effect of “I want X car in Y color, please send me an out the door quote for this vehicle itemizing all taxes and fees.” It’s important that you request an out the door (OTD) price because otherwise they’ll just take you to town on fees. You’ll get quotes back from a number of dealers. Some will be good, some bad. Pick the best 3 or 4 and start playing them off each other. Ask them to price match or beat. Many will want to discuss it over the phone or have you come into the dealership. Avoid this because that puts the ball in their court. Hide behind the anonymity of email. Also do not tell them what dealership offered what quote. It creates an environment for collusion. Eventually you’ll get to a price level so low you can’t play them anymore. A good way to see if you’re getting a good deal is to check Edmunds’ TMV (true market value) report which actually aggregates data of other sales in your area. Then move on to step 7.

Step 7: Take the best offer you got back to the dealer and tell them it looks good, you just want it in writing. Fax, email, snail mail. So long as it’s on company letterhead, signed by the agent, and includes a listing of all prices, fees and taxes with a summary OTD price at the bottom. Only after you receive this can you finally talk to them on the phone. This will be to arrange a time and date to pick up and pay for the car. Many dealers will require a deposit of good faith to hold the car.

It’s important to ignore all advances by the dealer to speak with you in person or on the phone. Also ignore discussions of financing and a trade-in. When it comes to financing, the dealer can probably offer you a good rate. But it doesn’t hurt to be pre-approved by a bank or credit union before you go in so you know which one to take. The dealer offered me a good rate which was better than I got from my bank (and my employer at the time) so I financed through the dealer. If you want to trade-in, discuss that in-person and bring quotes from the websites about how much its worth. Be ready to walk away from the trade-in if you don’t like the deal.

Now when you go in to make your purchase, make sure you test drive YOUR car before you sit down to do any paperwork. If there are any problems with it, make sure its taken care of. When you sit down to sign the paperwork they will try and upsell you on various services and products. THEY ARE NOT WORTH IT. Just say no, no, no, no, no matter how cool the demonstration is (that stain remover stuff looked cool).

Now drive off in your new car and enjoy life. Make sure you keep it for at least 5 years, but 10 is better. Oh, and if you want me to negotiate for you I’d be happy to. My fee is 10% of whatever I save you using MSRP as the starting price.

————————————————-

*Special note regarding cash: Offering to pay cash matters not to dealers these days. They’d actually rather you finance through them, because they make more that way. If you are in a position to pay cash, by all means do so.

*Special note regarding downpayments: They don’t care how much you put down. Do what you’re comfortable with, of course the more you do now they less you have to do later. I put 50% down.

*Special note regarding payments: You shouldn’t figure out how much car you can afford based on payments. Because they will just move you from 36 months out to 72 months until they find something you can afford. If you follow my rules above for a car you can afford, plus negotiation, plus being smart with money already, you should be able to afford the payments over 36 months and still pay it off early (I paid mine off in 11 months).

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Last year, I attempted to review the entire year. I offered commentary on the events, told you what was significant, and tried to add a little humor. In essence, I was trying to do what Dave Barry already does. If you don’t know who Dave Barry is, Google him, and buy all his books. He’s the funniest writer I’ve ever come across. This is mostly thanks to exposure from my parents.

So every year Dave writes and exhaustive review of the big events of the year in a month-by-month format. I’ve grabbed just a couple of samples from his review of 2009, so if you like be sure to check out the rest.

January
The No. 1 item on the agenda is fixing the economy, so the new administration immediately sets about the daunting task of trying to nominate somebody — anybody — to a high-level government post who actually remembered to pay his or her taxes.

March
An angry nation learns that the giant insurance company AIG, which received $170 billion in taxpayer bailouts and posted a $61 billion loss, is paying executive bonuses totaling hundreds of millions of dollars. This news shocks and outrages Obama and members of Congress, who happen to be the very people who passed the legislation that authorized both the bailouts and the bonuses.

April
The big health story in April is the rapid spread of swine flu, a dangerous new virus strain developed by the makers of Purell.

September
Obama, speaking on health care before a joint session of Congress, is rudely interrupted by Kanye West, who grabs the microphone and declares that Beyoncé has a better health-care plan.

November
In sports, the New York Yankees, after an eight-year drought, purchase the World Series.

This is but a sample, read the rest here. If I were a really good writer, this is what my 2009 review would look like.

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The $300k parking space immediately became a prime candidate for my coveted Weaky Awards.  As if it weren’t bad enough that even the choices for a $300,000 car are very limited, the situation that led to the current price was a classic example of an emotional purchase.  Parking spaces in this area of Boston regularly go for less than half of the $300,000 this guy paid.  A bidding war between residents led to the highly prized parking space.  Even if you have money to burn it’s conceivable that this person grossly overpaid for the spot.  Were you to treat this as an investment, it would be a long time before they make their money back if other spaces sell for half the cost.  Bad move.  If you wanted a spot to park your Ferrari because your wife’s Mercedes takes up the spot that came with your home, I hope you don’t mind it getting wet.  This is an outdoor and uncovered parking spot.

However $300k for a parking spot seems less outrageous when you put it into context.  For one thing we’re talking downtown Boston.  There is a district called “Back Bay” where the wealthy live and play.  The couple that sold their space are also selling their home, which is listed at $2.5 million.  I looked up the address and found a few listings between $2 million and $3.5 million, but not one specifically for $2.5 million.  But to give you an idea of what kind of area we’re talking about, here’s a listing in the same building for $2.7 million.

In order to understand $300k parking spots you have to think like someone that can afford a home costing more than 10x the national average.  This person obviously lives in Boston, their multi-million dollar home in Back Bay is probably their primary home too, though possibly not their only home.  They probably work very hard, and time is their most precious resource.  Though he can afford an Aston Martin, he probably drives something more comfortable, and less expensive.  This is because you don’t need 400 horsepower to navigate city streets, you need a soft suspension and something easy to park.  Assuming he’s married, his wife gets the garage spot that came with the home because, well, she’s the wife.  If this guy drives home from work every day in another part of Boston he might spend 30 minutes or longer finding a parking spot in this cramped neighborhood.  But when a fellow resident is selling a spot right near the front door to his own building he sees an opportunity.  He’d save himself valuable time and effort.  In this scenario $300k for a parking space starts to sound slightly more reasonable.  It’s not out of the question for me to say given that situation, I’d consider that too.  I hate the act of “finding parking.”

There are other possibilities too.  Maybe this guy is a lawyer and he operates out of his home. He’s got a good spot below the building, but his clients had nowhere to park.  Leasing high quality office space in Boston is no matter of “bargain hunting”.  $300k might pay for itself in a few years compared to what other lawyers are paying for office space and parking for their clients.  An he doesn’t even need to be a lawyer, it could be anything.

Of course it always could have been a big purchasing mistake fueled by a bidding war between two angry neighbors with more money than common sense, but I just didn’t have it in me to award this guy a Weaky.

Story: Boston Globe via Autoblog

Photo: zkorb

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No Debt Plan is about getting and staying out of debt with a plan. Kevin, the author, is passionate about budgeting, saving for the future, and using goals to reach financial freedom. You can subscribe to his blog by RSS or email.

This interview is part of a feature he’s developed called Subscriber Swap Saturday. The basic idea is to get the subscribers of one blog to subscribe to the other blog for at least a week, just to try it out. After a week if you don’t find that blogger’s content enticing, drop it. The hope is that over time you will find several writers that you weren’t familiar with who provide meaningful content to you. You can read more about Subscriber Swap Saturday at his get out of debt blog, as well as his interview with me.  So let’s learn a little bit more about Kevin.  My questions are in blue, and his answers are in black.

Using Twitter’s restrictions as a guide, describe No Debt Plan for my readers in 140 characters or less.

A personal finance blog that aims to help you get and stay out of debt while building wealth.

What is the No Debt Plan?

It’s the basic advice I would give anyone that is looking to go from in debt and lost about how to handle money to paying down debt and eventually being debt-free.

The focus and branding of No Debt Plan is obviously paying down and managing debt.  What sort of insight can you provide for someone like me, who currently has no debt?

Keep it up! Getting out of debt is just the first step. Continue to spend less than you earn. From there you need to start saving for future expenses — emergencies, home down payment, future kid education, and retirement. There is always something else you can apply that money toward. You’ve just got to prioritize your goals.

You run a website that serves ads as well as working which means you have at least two sources of income.  Do you think it’s important to diversify your income just like we diversify our investments?

Absolutely. I was very hesitant to put ads on my blog. For the first year or so I didn’t have any ads. I made a change and discovered I was missing out on making money! I don’t think they’ve bothered my readers too much either, or I wouldn’t have kept the ads up.

One of the founding principles of Weakonomics is that overall young people do not receive a proper financial education.  What are your thoughts on this and do you think financial literacy courses are more important than learning Spanish, Algebra II, or translating poetry?

I don’t know which of those things is most important, but I can tell you it is at least equally important. I’m not sure the government should be heavily involved in educating our youth about money — they don’t seem to have a good handle on managing budgets, either — but I think we could definitely improve the overall situation.

I’ve heard you have a thing for old BMWs, which means you have taste.  Given a budget of $500,000, what 5 cars would you love to own?  And because personal finance forces us all to think about all other monetary concerns, go ahead and assume you’re rich enough to get a business school named after you.

I’m going to stick to my favorites: 1988 BMW M3, 1995 BMW M3, 1988 BMW M5, and an old school Porsche 911. You’ll notice that’s only 4. The rest of the money would go toward a garage facility where I could work on all the cars — and fixing up my current 1978 BMW 320. (Editor’s note: I love this guy!)

I’m getting married this fall, what advice do you have for me?

Marriage counseling. It forces you to ask each other the tough questions about marriage — kids, family, where you will spend holidays, money, where you want to live, etc.

And remember that she is a much more emotional being than you are, so be delicate with your words toward her. Someone can insult you and it will roll off your back. The same is not true of your wife.

Which was harder, business school or taking the GMAT?

Taking the GMAT. Geometry has absolutely nothing to do with business.

SEC or ACC?  Yes this is a loaded question.

Loaded? There’s no question: Southeastern Conference. No one else is more dominant. (Editor’s note: the love is gone)

This concludes my interview with Kevin.  I want to thank Kevin for taking the time to answer my questions.  And even if his taste in collegiate sports is questionable, I would at least like to extend an offer: we’ll trade you Florida State for South Carolina.

Don’t forget to subscribe to his blog by RSS or email.

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You may or may not know that various car companies sometimes share knowledge, parts, and people to save money.  For instance, Lotus uses Toyota engines, Hyundai’s Genesis Coupe has turbo motor shared with Mitsubishi, Nissan licenses hybrid technology from Toyota and is rumored to be working on a truck that is based on the Dodge Ram.  Please understand none of these companies own each other.  They are “independent.”

What Autoblog taught me that it isn’t just the engineering or production that companies borrow from each other.  They invest in each other.  It’s not simply something like Toyota owning a bit of Subaru and Porsche’s constant attempts to take over Volkswagen, car companies loan each other money too.  This knowledge has emerged amid the Chrysler bankruptcy.  When a big company goes down the pooper like this, companies that have loaned money by purchasing bonds (bondholders) must come to the court and make sure they are represented.  The list of top creditors to Chrysler has popped up, and the results were simply astounding.  The top creditor is…

“…Ohio Module, which is a subsidiary of Hyundai Mobis, which is in turn a publicly traded subsidiary of Hyundai. Ohio Module makes chassis for the Jeep Wrangler and Chrysler has run up a $70 million tab with [Ohio Module].”

Another creditor to Chrysler is Visteon, a spin off of Ford that still does most business with Ford.  Another is Chrysler’s advertising agency; still further a former executive that has also worked for Ford & BMW, and just retired from a 7 year post at GM is listed as a bondholder.

It’s difficult to perceive how companies within an industry can successfully compete with each other when they are all working together.  It comes as no surprise that the industry is still stuck on the internal combustion engine, struggles to get above 40 miles per gallon, and has yet to create any new technologies of world changing significance.  Doing any of these things would risk upsetting your bondholders, shareholders, or vendors.

This is an absolute mess  And it’s not just Chrysler.  Everyone in the automotive industry is in bed with each other.  This is why last year the different companies all came together in Washington and said that if one goes down the others will suffer too.  They’ve created a little web of interdependence that is going to take years to unravel.  And it’s going to be unraveled on the taxpayer’s dime.

Photo: kevinbondelli

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Tesla was previously in the headlines for their Roadster (red on right), a beautiful 2-seater sports-car that runs on only electricity.  That car would set you back more than $100,000 though and is only a niche vehicle.  Nevertheless, if I could have any five cars I wanted, the roadster would be one of them.  Whatever family sedan is on my list of five would be bumped now in favor of the Model S.

Like the Roadster, the Model S runs entirely on electricity.  Unlike the Roadster it will hold five adults and two children.  The child seats are the old school back of the station wagon style.  I don’t really expect that feature to make it into production, but I could be wrong.  The car is expected to be able to get 300 miles out of a charge, and the charge should only take a few minutes.  That is for a high capacity version.  The basic version will have a range of 180 miles.  This allows for stress free commuting for most people.

What makes the Model S so significant though is the price.  With a federal tax credit, the basic version will set you back less than $50,000!  That isn’t exactly Honda Accord territory, but it is BMW 5 Series territory.  BMW sells the 5 by the thousands here in the US, so there is no shortage of people that will be able to afford this car.  With the battery upgrades for extended range, I expect the higher end versions to cost as much as $80,000.  That is 7 Series territory, but again BMW moves thousands of them too.

I say this is the turning point in automotive production because this car is an all electric car for the masses.  There are still many bugs to be worked out, but those that buy this car will no doubt help the company iron out those kinks.  Since their first car was $100,000 and this one is $50,000, you can probably guess where they’re headed after that.

Don’t assume I’m some hippie green person, I’m far from it (all other cars in my fantasy garage would probably average 15 mpg).  But I do encourage American innovation and the electric car is an inevitable step in the future of transportation.  I want it to be Americans that lead this industry, and I want the cars to be built here too.  The added bonus of not sending oil money to the middle east is nice as well.

There’s no chance I’ll be able to afford this car before something better comes along to replace it.  But it is the things we dream about as we’re working towards wealth that inspire us to work harder.  The Tesla Model S is expected to begin production in 2011.

*No, the Volt is not the future because Chevy will somehow screw it up.  It’s also not fully electric.

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But I’m sick of politics.  I’m sick of the economy.  I’m very sick of talking about money at all.  So I’m going back to some of my other hobbies and interests today.  One of my favorite things to do is read about cars.  My favorite car blog is Autoblog.  But sometimes I always don’t have the time to read everything I want to.  Being a slow reader and prone to distraction, it can sometimes take me days to get through a 1,000 word post about the new BMW 7 Series.

This is where Spreeder.com comes in handy. With Spreeder, you simply copy the text of what you want to read (email, post, article, word doc, etc) and paste it into the spreeder box.  What Spreeder will do for you is show each word in your article one after the other at whatever speed you want.  The default setting is 300 words per minute (WPM) but you can change it to be faster or slower.  I’ve found some topics can be read at faster speeds, while others require me to dial it down.  Usually articles that contain more in depth details – like the subtle nuances of a new BMW – require me to take it down to 275 or 250.

The beauty of the system is I get to finish the article I want to read, and I do it much faster than I normally would have.  The trick is to throw out your old way of reading.  If you waste energy on identifying each word you see, you will have to take it down to 150 wpm in order to keep up.  Instead keep your eyes on the screen and trust your brain to recognize to word, instead of you recognizing letters.

If you’ve ever tried speed reading, this is a similar concept, but there are differences too.  I’ve tried speed reading, just can’t do it.

So take your favorite blog and give Spreeder a shot.  Let me know how it works out for you.

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Before we go on long trips like this I like to go through a checklist of things to make sure we’re all set.  Here are some of the things I do before leaving:

• Check tires to insure proper inflation (better mileage on highways and avoid high speed blowouts).
• Make sure oil and fluid levels are where they should be.
• Wash my car (cleaner cars are more aerodynamic).
• Confirm hotel reservation so we don’t show up and have no place to stay.
• Confirm with appointments with anyone  I may be meeting.
• Check my route on a map and have printed directions.
• Input the route in my GPS to have turn-by-turn directions. *NEW*
• Pack some cheap and healthy snacks to avoid convenience snacking on the go.
• Pick up some cash, because when you’re out of your local area, you never know when you might need some.

Also today happens to be Valentine’s Day, and as much as I believe it is simply a made-up holiday by restaurants and Hallmark stores, it is an important day in my relationship to my fiance.  This will be our last V-Day as bachelor and bachelorette, so this time next year we will be married.  It’s a fantastic thought, and each new day will be another reminder of our wonderful future together.  Though The Sheconomist would probably love to get a bunch of flowers and a fancy dinner today (she’ll get something don’t worry), there is nothing I’d rather do on Valentine’s Day than spend the entire day in a car traveling across the southeast with her.

I hope everyone has a fantastic Valentine’s Day.  And for you single and lonely folks out there, be happy you can save your money.  Next year you’ll have to blow a bunch of it impressing that new person you’re dating (been there!).

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Below you will find my comprehensive list of the events of 2008, which includes my review from the first half of 2008.  If you want to add something, leave it in the comments and I’ll update the post. Most of the links are to posts I wrote, which in turn have posts to news stories, or direct links to the stories. Enjoy!

January 14 – National average price for a gallon of regular gas is $3.07 according to The Department of Energy

January 15 – The Weakonomist buys a 2008 Honda Accord.  Given the great deal he gets and the accelerated payoff schedule, he doesn’t bother trying to negotiate down the financing.

January 22 – Emergency Fed Cut:  Media hype leads to the “recession” being a word on the same level as your choice of derogatory terms.  Said media creates market turmoil.  To keep Wall Street executives from jumping out of window like 1929 Superman is contracted to physically lift up the NYSE to keep it afloat Fed Chairman Ben Bernanke cuts the fund rate 75 basis points in an unprecedented and unscheduled move.

January 29 – The US House of Representatives, lead by Wonder Woman, introduces the Economic Stimulus Act of 2008.  Most taxpayers will receive a $600 stimulus check.

January 30 - Additional Cut:  8 days after the emergency cut The Fed cuts the rate another 50 basis points.

February 13 – The Economic Stimulus Act of 2008 is signed into law by the president.

February 29 – Philip becomes The Weakonomist when he registers Weakonomics.com with BlueHost.  No one notices.

March 14 - Bear Stearns Collapse:  Amid speculation of a liquidity problem (that means people thought they wouldn’t be able to sell their investments for cash) Bear Stearns stock falls from around $60 to $5.  The Fed and JP Morgan bail out the investment house in a series of events that will likely define the sub-prime meltdown of 2008.  This will be in textbooks someday.  Additional reading:  CNBC may be to blame for causing the run on Bear.

March 18 – Scheduled Fed cut:  Bernanke and team cut the funds rate another 75 basis points.

March 31 – Henry Paulson, Treasury Secretary, comes out of nowhere to recommend drastic changes to the regulatory policy of investments, mortgages, and the industries associated with it.

April 15 – Tax day for everyone: Well, except for Wesley Snipes.

April 21 – National average price for a gallon of regular gas cross $3.50 in a move now considered to be the death of the large truck and SUV market.

April 30 – Fed cut:  The federal funds rate is again cut to bail out borrowers with adjustable rates.  The 25 basis point move has taken rates from 4.25% down to 2% in 4 months.

May 1 – The Weakonomist thinks it might have been worth his time negotiate the APR on his car as current deals are half what they were in January.  However, The Weakonomist still won’t pay more than $500 in interest over the life on the loan.

May 12 – Death of a Campaign: Hillary Clinton, in a desperate attempt to differentiate herself from Obama, supports the notion of suspending the 18.5 cent federal gas tax for the summer. The American public surprises The Weakonomist by seeing how stupid that really was.

May 13 - Congress introduces a bill to halt the purchase of oil for the strategic petroleum reserve.

June 2 – Wachovia cans their CEO for the poorly timed purchase of Golden West in 2006  - the 2nd largest seller of sub-prime mortgages.  Wachovia’s stock price looks like that really steep water slide you’re too scared to go down because you can’t injure yourself since your wife is too drunk to drive home from your “daycation” or “staycation” to the local water park because you can’t afford to drive out of state.  You go for it anyway, twisting your ankle, ripping your trunks, and showing your rear end to the entire water park.  Embarrassed, your children swear they will never speak to you again for not taking them to Disney World.  Your drunk wife flirts with the lifeguard.

June 9 - National average price for a gallon of regular gas passes $4.00.  The Geo Metro becomes popular again, defying all logic.  Commuters consider a switch to equidaen transportation but the price of grain has spiked with oil.

June 19 – Ralph Cioffi and Matthew Tannin are arrested and paraded through New-York by the government on charges of fraud and conspiracy in their subprime mortgage hedge funds at Bear Stearns.

June 25 – CountryWide Financial shareholders approve the sale of their company for $4 billion to Bank of America.  A bargain considering the purchase would have cost $24 billion last year.  Compare to Wachovia’s purchase of Golden West in 2006, CountryWide’s smaller rival, which they paid $25 billion for and you can see why they had to dump their CEO in June.

July 1 - Bank of America completes is acquisition of CountryWide Financial.  They are immediately sued.

July 4 - America takes a break. The rest of the world realizes they’re screwed too.

July 11 - IndyMac, the Freddie Mac of subprime mortgages, fails massively. Turns out it was created by Countrywide founder Angelo “Tropicana” Mozillo because Freddie Mac can’t buy his crappy mortgages.

August 2 – National average price for a gallon of gas is $3.87.

August 8-24 - Americans lost the Gold Medal count to the guys that make our iPods. The Weakonomist explains how the Olympics are paid for.

August 20 - Debate rages on whether or not Freddie and Fannie should be bailed out.

September 1 – Hurricane Gustav strikes land, sending one final spike in the price of oil to $150. Of course we didn’t know it was the final spike.

September 9 - The debate is over, the bailouts begin.

September 15 - Lehman Brothers declares bankruptcy. The significance here is the government let them fail.

September 15 – Bank of America buys Merrill Lynch.  A rocky relationship begins.

September 17 – AIG strong-arms the federal government into keeping them alive. For a story on the three events above click here.

September 23 – Investment banking as an industry is effectively dead.

September 25 - WaMu fails, is bought by JP Morgan

September 29 – Not to be out done, a virtual bankrun almost sends Wachovia packing. They’re saved by Citi, then Wells Fargo. Wells Fargo wins the ensuing legal battle. Citi dies 4 month later, but not before getting a bailout.

October 8 – The Federal Reserve cuts the target lending rate 50 basis points to 1.5%

October 14 – Hank Paulson launches TARP, the Troubled Asset Relief Program. This is the bank bailout.

October 14 – National average for a gallon of gas touches $3.50.

October 29 – The Federal Reserve cuts the target lending rate 50 basis points to 1.0%

November 4 – We elect Jesus Barack Obama to be our next president.

November 25 – Citigroup gets a bailout to deal with the losses from not getting Wachovia. The effort later proves futile.

November 25 – Treasury Secretary Hank Paulson announces a multi-trillion dollar bailout of the financial sector, which now makes the government a bank, investor, and insurer.

December 1 – The National Bureau of Economic Research gives their seal of approval on being in a recession. Here are five questions not to ask during one.

December 1 - OPEC meets in Cairo to discuss the drop in oil prices. No one seems to be able to agree on what they should do, which is good for oil prices.

December 5 – Unemployment hits 6.7%, 2 million jobs are gone before the end of the year.

December 12 – Former NASDAQ chairman and famous investor Bernie Madoff is busted for running a Ponzi Scheme.

December 16 – The Federal Reserve cuts the target lending rate 100 basis points to 0%. To make it not seem so bad, they say the rate is “between 0% and 0.25%. It is now basically free for banks to borrow from the Fed.

December 19 - Christmas comes early to Detroit, they get their much needed bailout.

December 31 – National average price for a gallon of gas is $1.60

Related posts:

1. Review Of What Happened In 2009, Courtesy Of Dave Barry
2. Gaps In Assumptions About Oil & Gas Prices
3. Book Review: SuperFreakonomics

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