I am always surprised when news I thought everyone knew moves stocks. Financial stocks are happy after hours as details of the government's plan to overpay for bad assets with your grandchildren's money.... err, I'm sorry - as details of the government's plan to make excellent long term investments emerge... i.e. "the bad bank". Everyone knew this was coming but apparently it is setting hearts racing.
Remember, it's not the first 21,286 solutions that matter. It's the 21, 287th.
"We're saved! The Fed is cutting rates"
"We're saved! They rescued Bear"
"We're saved! Some sucker (BAC) bought Countrywide"
"We're saved! Fannie and Freddie taken over"
"We're saved! AIG solved"
"We're saved! Lehman now gone"
"We're saved! Merrill sold to Bank of America"
"We're saved! The Fed is backstopping commercial paper"
"We're saved! The Fed is backstopping money markets"
"We're saved! Wachovia sold to Wells Fargo"
"We're saved! TARP is passed"
"We're saved! Citigroup backstopped and given new loans"
"We're saved! Bank of America backstopped and given new loans"
I left out about 15 other instances, but you get the point. We rally on each one as the lemmings clap and nod their head - time to buy stock. Just add this to the list.
"Suckered the tax payer again!" Sincerely, Wall Street
Goldman Sachs (GS) is enjoying a nice splurge in after hours so it looks like my stop on the short position will be triggered tomorrow morning as Kool Aid overflows in the streets. You just can't invest normally when the not so invisible hand of the government means more than capitalism. So we'll eat a quick loss as the invisible hand slaps us across the face for daring to meddle with it.
CNBC reports...
The Obama administration is close to deciding on a plan to purchase bad—or non-performing and illiquid—assets from banks, according to industy sources. The plan could be announced early next week.
The so-called "bad bank" plan, would address the key problem of how to price the assets by using a model-pricing mechanism. The model would take account of the government's ability to hold onto assets, even to maturity, and pay for the them with cheap funding. Result: the government might end up paying more than current market prices for the securities.
On the other hand, if the government paid less than the value at which the asset is carried on the bank's books, the bank would issue common equity to the government.
The move toward a bad bank concept comes amid growing speculation that banks may need another government bailout. Goldman Sachs economist Jan Hatzius recently said global credit losses may approach $2.1 trillion. Of that total, banks worldwide have already absorbed about $975 billion in losses, he estimated in a research report, suggesting the worst is far from over.
FBR Capital Markets analysts said eight of the largest U.S. financial institutions need up to $1.2 trillion in new common equity and that "the government is the only entity that can provide bridge capital to get past the current credit crises."
Sure why not... it's only money. I don't think $1.2 Trillion will be enough myself. The hilarious thing is it's all a shell game - we're going to get equity from the banks? Banks that would be zero if not for the federal backstop? Meaning we are going to fund this with what would be worthless stock - if not for the government. See how circular it is? We just are too proud to use the word "nationalize" - that is anti American.
Anyhow, the "free marketers" that run Wall Street are absolutely joyful in glee, as they are each time the government has intervened. Remember, when we're drunk on Kool Aid, we don't want the government to bother us. They interfere, slow us down, and ruin our innovations. When we wake up the next morning to see what we did in our drunken stupor - then the government is welcome. As long as they make our doo doo go away. Then once they do that we will lobby them over the ensuing 5-7 years to make sure their regulations are slowly dismantled piece by piece. See ya in 2016 when we're back to "normal"
Trader Mark
www.fundmymutualfund.com
Remember, it's not the first 21,286 solutions that matter. It's the 21, 287th.
"We're saved! The Fed is cutting rates"
"We're saved! They rescued Bear"
"We're saved! Some sucker (BAC) bought Countrywide"
"We're saved! Fannie and Freddie taken over"
"We're saved! AIG solved"
"We're saved! Lehman now gone"
"We're saved! Merrill sold to Bank of America"
"We're saved! The Fed is backstopping commercial paper"
"We're saved! The Fed is backstopping money markets"
"We're saved! Wachovia sold to Wells Fargo"
"We're saved! TARP is passed"
"We're saved! Citigroup backstopped and given new loans"
"We're saved! Bank of America backstopped and given new loans"
I left out about 15 other instances, but you get the point. We rally on each one as the lemmings clap and nod their head - time to buy stock. Just add this to the list.
"Suckered the tax payer again!" Sincerely, Wall Street
Goldman Sachs (GS) is enjoying a nice splurge in after hours so it looks like my stop on the short position will be triggered tomorrow morning as Kool Aid overflows in the streets. You just can't invest normally when the not so invisible hand of the government means more than capitalism. So we'll eat a quick loss as the invisible hand slaps us across the face for daring to meddle with it.
CNBC reports...
The Obama administration is close to deciding on a plan to purchase bad—or non-performing and illiquid—assets from banks, according to industy sources. The plan could be announced early next week.
The so-called "bad bank" plan, would address the key problem of how to price the assets by using a model-pricing mechanism. The model would take account of the government's ability to hold onto assets, even to maturity, and pay for the them with cheap funding. Result: the government might end up paying more than current market prices for the securities.
On the other hand, if the government paid less than the value at which the asset is carried on the bank's books, the bank would issue common equity to the government.
The move toward a bad bank concept comes amid growing speculation that banks may need another government bailout. Goldman Sachs economist Jan Hatzius recently said global credit losses may approach $2.1 trillion. Of that total, banks worldwide have already absorbed about $975 billion in losses, he estimated in a research report, suggesting the worst is far from over.
FBR Capital Markets analysts said eight of the largest U.S. financial institutions need up to $1.2 trillion in new common equity and that "the government is the only entity that can provide bridge capital to get past the current credit crises."
Sure why not... it's only money. I don't think $1.2 Trillion will be enough myself. The hilarious thing is it's all a shell game - we're going to get equity from the banks? Banks that would be zero if not for the federal backstop? Meaning we are going to fund this with what would be worthless stock - if not for the government. See how circular it is? We just are too proud to use the word "nationalize" - that is anti American.
Anyhow, the "free marketers" that run Wall Street are absolutely joyful in glee, as they are each time the government has intervened. Remember, when we're drunk on Kool Aid, we don't want the government to bother us. They interfere, slow us down, and ruin our innovations. When we wake up the next morning to see what we did in our drunken stupor - then the government is welcome. As long as they make our doo doo go away. Then once they do that we will lobby them over the ensuing 5-7 years to make sure their regulations are slowly dismantled piece by piece. See ya in 2016 when we're back to "normal"
Trader Mark
www.fundmymutualfund.com
