In Vegas, hitting triple 7s pays out. But when the Dow Industrials (DJI) tank 777 points in one day, my only bet is to invest on the short side to make big profits on failing companies’ huge losses.

The financials are falling like dominoes — overvalued, under-capitalized and potentially toxic dominoes. I just hope you were able to get out of the way in time. Or better yet, perhaps you were able to get on the short side of the investment banks like Lehman Brothers (LEHMQ), Washington Mutual (WM) and Wachovia (WB).

Despite the political tantrum many nearly half of the House of Representatives members threw by voting against the $700 billion federal bailout for the vexed financial sector, the bailout will still happen. It took a long time to create this Wall Street mess; if it takes a few extra days for Washington to produce the best-possible outcome, we can afford to be patient.

Take a look at how patience has paid off for those of us who’ve been betting against the banks has paid off. …

A ‘Short’ List of Losers Produces Big Options Wins

Oh, how the mighty have fallen.

But those companies’ sketchy business practices (subprime loans, anyone?) gave us plenty of warning that they were going to implode.

Whether or not investors chose to listen, however, is another matter entirely.

Fortunately, my ears work just fine — some say it’s because they’re attached to a rather big head — but tell that to my ChangeWave Shorts subscribers, who booked three money-doublers in the midst of one of the market’s ugliest sessions ever.

I predicted the likes of today’s market massacre as early as last year, and I also foresaw the demise of the latest round of toppled titans.

But I’m no psychic — just a data nerd. And the writing was definitely on the walls, on the ceiling and the floor, and even on the windows.

So, now that we have this mess to deal with, we all want to know what’s coming next. Plain and simple, neither the banking crisis nor the short-side profits are anywhere close to being over.

Bet on the Bailout

Despite the political tantrum many nearly half of the House of Representatives members threw by voting against the $700 billion federal bailout for the vexed financial sector, the bailout will still happen.

It simply has to — especially on the heels of the largest U.S. bank failure, a significant European bank collapse and a large U.K. mortgage company crash. The crisis is contagious, and the world credit markets are now showing the same cracks the United States has witnessed.

In response, the Federal Reserve, working with European Central Bank (ECB), has promised to provide unlimited liquidity to world credit markets until we restore equilibrium.

There’s no figure yet for how much short-term liquidity the Fed and the ECB are going to inject, but they will basically push short-term interest rates, via liquidity injections, to zero. This should encourage other banks to start lending again in the short term.

What does this mean for us, closer to home?

The bailout is as good as a done deal, including a clause that gives the Treasury power to acquire warrants from companies when accepting bids for bad assets. The issue now becomes what actual prices the Treasury will offer for toxic assets, which makes valuing financial institutions based on their assets and current equity nearly impossible.

This might even be why stalwarts Morgan Stanley (MS) and Goldman Sachs (GS) made the move for more government protection, despite relatively solid books.

But if you’re hoping that the worst is over for the investment banks, well, the Titanic is only just approaching the iceberg. And there aren’t enough lifeboats handy for everyone who’s going to need one.

Wachovia Got Whacked … Who’s Next?

The Federal Deposit Insurance Corp. (FDIC) took over Wachovia’s deposits, who then sold them to Citigroup (C).

Citi, in turn, granted up to $12 billion in preferred shares to the FDIC. It also guaranteed up to $32 billion in bad Wachovia assets.

The FDIC is on the hook for the rest, hence the preferred shares.

Citi made a smart move because now it’s too big to fail. And since the government has essentially pledged its commitment to the big banks while tossing the smaller frys, like Lehman Bros., to the wolves, Citi is on higher ground.

But that higher ground isn’t entirely solid ground. Citi may have announced a 50% dividend cut and $10 billion equity raise, but it’s not nearly enough. The company is grossly overvalued, and it will need to radically dilute shareholders, which will hit C’s stock values.

If you’ve been holding Citi long, waiting for a turnaround, you may want to reconsider — unless you’ve got a lot of time on your hands. Much of its future depends on what promises were made to the company about the upcoming bad-asset auctions and at what price it will be able to sell these assets to Uncle Sam.

In fact, everything is hanging in the balance while we wait for Uncle Sam’s stance. There are a lot of wild cards in the next month that will have unpredictable effects on the market including:

• The signing of the bailout bill
• The first bad-asset auction and the “bid” or price for banks’ assets
• The election

If today is any indication, we are in for a wild ride … or more like a wild slide.