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8:00 AM EST, Monday, October 6, 2008: Good that the bailout bill got passed by Congress. It will stick a finger in the dyke. But the dyke is springing new holes by the minute. The bill will not magically restore confidence to bank loan officers, who remain scared and frozen. Ultimately everyone -- that means you and me -- will be hurt. I now believe it could take as long as 10 years for things to return to "normal."

You need to prepare yourself and your business for seriously hard and very different times. That doesn't necessarily mean reducing expenses. It may mean increasing your R&D. It may mean buying your distressed competitors. Played smartly, you (and I) could emerge unscathed and larger than life on the other side. But -- and this is the key point -- this is a different world. There are new rules, one of which is that getting loans is will stay really hard. Watch Buffett. He's playing this brilliantly and carefully -- getting his assured dividend at the same time as getting his discounted stock. I bet his only fear is "Am I catching this falling knife too early?"

This morning's overarching lesson (and one I've harped on for months) is to move your money to a safe place. If you can't find one, treasuries are the place. Don't chase yield. Safety is the only thing you're interested in. Of the zillions of articles I read on the weekend, this one got me the most:

From TimesUnion.com in Albany, New York:.

Wachovia's woes hit area schools
College of St. Rose, Skidmore among local colleges with investments partially frozen by embattled bank

At least two local schools, the College of Saint Rose and Skidmore College, have multimillion-dollar investments in a popular fund that was partially frozen by Wachovia Corp. this week.

The move left colleges around the country fretting over how to pay bills. Nearly 80 colleges in New York — home to the world's largest private higher education sector — have $1.2 billion parked in the $9.3 billion Short Term Fund, an investment tool used by about 1,000 colleges and private K-12 institutions.

The 34-year-old fund is similar to a money-market or interest-bearing checking account. Colleges use it to deposit revenue such as tuition. They redeem the investments as needed for expenses such as payroll, maintenance and utilities.

The developments are "a very unpleasant surprise" for colleges who considered the fund "as solid as the dollar," said Marcus Buckley, vice president for finance and administration at the College of Saint Rose.

"This is really unprecedented," said Buckley, whose Albany college had about $33 million in the fund. "And I think it goes to show just how enormous a ripple in the pond has been created by the financial dislocation in the markets." ...

Wachovia, the fund's trustee, announced on Monday plans to terminate the fund and set up a liquidation of its assets. Wachovia initially told investors they could withdraw only 10 percent of their money. By Friday, that had risen to 38 percent.

Laura Fay, a Wachovia spokeswoman, told the Associated Press that partially freezing the Short Term Fund as officials prepare for liquidation prevents a run on money and protects investors.

"It was not something we took lightly," Fay said. "In this environment, we felt this was the best way to proceed."

Money deposited in the fund is invested in short-term securities, said Keith Luke, managing director of the Connecticut-based Commonfund, which is an adviser to the Short Term Fund and one of the country's largest investment managers for nonprofits.

But with what's happening in the financial markets, "even the most liquid, highest-quality securities can no longer be sold and traded," Luke told the Times Union Friday morning. ...

On Thursday, Commonfund also announced a 30 percent limit on withdrawals from its Intermediate Term Fund after investors in the Short Term Fund tried to withdraw money from that fund, according to the Associated Press.

Locally, Skidmore has $38.5 million invested in the Short Term Fund and $4.5 million in the Intermediate Fund....

Credit default swaps (CDS) are the root of all the financial evil. Think of them as an insurance policy. I am a salesman for a Wall Street firm. I want to sell you a crappy security, like a collection of bum residential mortgages. You, the buyer, may be hesitant. (Seriously, some actually were.) So I sell you an insurance policy that if the crappy security doesn't pay off, I'll pay it off. Just like a piece of insurance protecting you against a fire.

The problem is that the issuers of this CDS "insurance" didn't set aside the reserves to meet the CDS claims. And they went broke -- AIG, Bear Stearns and Lehman Brothers.

There are more credit default swaps out there than the entire GDP of the world. It's a serious mess. You can read more on the transcript of last night's 60 Minutes and in Fortune Magazine. In 2003 Warren Buffett famously called derivatives (which is what CDS technically are) "financial weapons of mass destruction." He was right.

Advice from Friday. In case you missed Friday's column, here's a modification:

The blood is running in the streets. (Look at what happened to European markets this Monday morning.) The basic rules:

Number one rule. The price you pay now will determine the profit you make on the other side. You're not looking for bargains now. You're looking for steals. Today's (Friday's) Wall Street Journal talks of home builder D.R. Horton unloading land across California "at big discounts." Sample: They recently sold land at $7.8 million that cost them about $110+ million. That's a 93% discount. The last time I looked, they weren't making any new land in California and people are still moving there, despite the awful traffic.

Number two rule: You only search in areas you know something about and are close to. I don't live in California. Cheap land there has little appeal to me. Also I know there are zillions of people out there with cash who are pouncing on steals.

Number three rule: Be wary of "stories" -- especially those from your "friends' who are trying to sell you something. In today's world, "stories" are wrong. There's usually a "gotcha." And everything today is backwards.

Number four rule: Don't ignore your day job. You still have customers. Love them more than usual. Send them a Reward Discount Certificate. Hold a Recession Sale. Call them on the phone. Find out how they're doing. Talking to your customers might actually give you some ideas on what they want and hence what you can sell them.

Number five rule: Stay well away from the stockmarket. It's going down the toilet for obvious economic, earnings and financial stock reasons. And there are new factors coming in. There will be huge hedge fund redemptions at the end of December. Most funds are selling now to get the cash to pay their investors back. Call it a run on the hedge funds. It will break many hedge funds, just as it broke many banks in recent weeks, e.g. WaMu. Check out lousy hedge performance on Bloomberg.

Number six rule: Maximize your cash. That means cutting expenses and putting it somewhere totally safe.

Number seven rule: Spend time on your health. Get yourself a flu shot. Do more exercise. Eat less. The usual stuff.

Number eight rule: Spend more time with your family. You're doing all this for them. Give them soft love. It's all you can probably afford now.

Number nine rule: Get moving on your estate planning. Buying life insurance against your estate is a government "free lunch."

Number ten rule: Don't go overseas in search of "safe havens." Apparently the U.S., despite our ills, is now the world's "safe haven." The Australian dollar is now 79 U.S. cents. When I sent money there a couple of months ago, attracted by Australia's high bank yields, the Aussie dollar was 96 U.S. cents. What with WaMu and the Aussie dollar I've really demonstrated how stupid I am and (I guess) how difficult it is to make a miserable shekel chasing yield. (DON'T.) Good news: I bought one share of Berkshire Hathaway when Buffett announced his first bailout. And -- miracle of miracles -- it's up. Pray he lives until 120.

Who are you?
A 54 year old woman had a heart attack and was taken to the hospital. While on the operating table she had a near death experience. Seeing God she asked 'Is my time up?'

God said, 'No, you have another 43 years, 2 months and 8 days to live.'

Upon recovery, the woman decided to stay in the hospital and have a face-lift, liposuction, breast implants and a tummy tuck. She even had someone come in and change her hair color and brighten her teeth!

Since she had so much more time to live, she figured she might as well make the most of it. After her last operation, she was released from the hospital.

While crossing the street on her way home, she was killed by an ambulance.

Arriving in front of God, she demanded, 'I thought you said I had another 43 years? Why didn't you pull me from out of the path of the ambulance?'

God replied: 'I didn't recognize you.'

This column is about my personal search for the perfect investment. I don't give investment advice. For that you have to be registered with regulatory authorities, which I am not. I am a reporter and an investor. I make my daily column -- Monday through Friday -- freely available for three reasons: Writing is good for sorting things out in my brain. Second, the column is research for a book I'm writing called "In Search of the Perfect Investment." Third, I encourage my readers to send me their ideas, concerns and experiences. That way we can all learn together. My email address is . You can't click on my email address. You have to re-type it . This protects me from software scanning the Internet for email addresses to spam. I have no role in choosing the Google ads on this site. Thus I cannot endorse, though some look interesting. If you click on a link, Google may send me money. Please note I'm not suggesting you do. That money, if there is any, may help pay Michael's business school tuition. Read more about Google AdSense, click here and here.