The Bailout

HenryTo · Posted: Wed Mar 26, 2008 4:09 pm Post subject: The Bailout

I appreciate the past discussions on the morals of any bailouts for both mortgage lenders and homeowners. Since this is an investment forum, I would like to restrict this discussion to the potential investment implications of any bailouts, though, if y'all don't mind. Cool

http://money.cnn.com/2008/03/26/news/economy/bailout/index.htm?postversion=2008032614

Texdan · Newbie Joined: 19 Jul 2008 Posts: 13

I understand the bailout funds can be used to buy assets from any US subsidary bank. I am curious to know if foriegn countries have toxic paper on foriegn assets or are they all on US assets. In other words was the whole world on a borrowing binge or was it primarily US.

rffrydr · Posted: Thu Oct 02, 2008 11:09 am Post subject:

A grand debt-for-equity swap:

http://blogs.ft.com/maverecon/2008/09/more-and-different-including-a-debt-for-equity-swap-for-the-financial-sector/

Can the system handle that kind of dilution?
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rffrydr · Posted: Thu Oct 02, 2008 10:30 am Post subject:

News takes a turn--revealing hits to the little guy:

http://www.latimes.com/business/la-fi-credit2-2008oct02,0,5767056.story
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nodoodahs · Moderator Joined: 06 May 2005 Posts: 1872

Largest price declines in long-term winners like energy, commodities, infrastructure. Just around the time that hedge funds would be liquidating portions of their portfolios in order to meet quarter-end redemptions?

There's some suggestion that Monday was caused by that type of selling ... don't know how true that is ...
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gregf · Posted: Thu Oct 02, 2008 8:36 am Post subject:

This is how the market makes fools of us all at some point.

The volatility in the market lately is enough to make you sea sick.
200 pts is nothing, I wouldn't read much into that at all.

We're for the most part range bound at this point, waiting for a resolution to the uncertainty of the rescue plan getting passed.

Given the recent events - the senate passing the plan was a foregone conclusion - very anticlimatic IMO. The market rally into that was expected. Reid's monologue last night was sedate - there wasn't a wiff that I could sense of it not passing.

And, the rally ended when it hit the uptrend line from 9/18-9/26.

Today is the waiting game for the House, hence, no decisive move would be my expectation. Expect support around DIA 105 (104.86)

This bill passes I think we shoot the moon - everything is lined up, sentiment is horrid, we've got bank runs, ridiculous moves in gold/treasuries/interest rates/etc, tons of liquidity, lots of $ on sidelines, etc. All of Henry's points are certainly in play.

It is extremely noteworthy to me that the KRE has had AMAZING relative strength the past 2 weeks - with banks failing right and left. That should tell you something, IMO.

Also - today's decline is led by Materials, Energy and Industrials. NOT financials, fwiw.

If not, we collapse and then what will it matter Shocked

rffrydr · Posted: Thu Oct 02, 2008 8:26 am Post subject:

Amazing they didn't put the Vote to the Senate first (Rogers Rules?). Amazing they didn't have LEH nailed down before GSEs...the tactics suck; the strategy is sound.
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Texdan · Newbie Joined: 19 Jul 2008 Posts: 13

The Senate approves the bill and the futures sink (DOW -105). Any thoughts?

krips · Junior Poster Joined: 07 Jun 2007 Posts: 35

Friday

lion hunter · Senior Poster Joined: 27 Mar 2006 Posts: 108

When does the house vote on the bailout?

rffrydr · Posted: Wed Oct 01, 2008 1:38 pm Post subject:

Theatre would seem to demand no rally til bill passes. Comeback rally good enough for Senate but we'll have to hold the fire under the House's feet.

Art Cashin call Buffett "The Good Housekeeping Seal of Approval." I'd like to see him make some smaller buys--of stock!
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Today is the Tomorrow you worried about Yesterday!

Greystone1 · Newbie Joined: 23 Sep 2008 Posts: 9

Good is relative.

In a free market, some perish and others eventually pick up market share, survive and thrive. What I am suggesting is that we speed up the process, accelerating both the bloodletting and the recovery.

If we, as taxpayers, are going to invest in our economy, we should put our money behind those companies which have the best prospects.

rffrydr · Posted: Wed Oct 01, 2008 12:34 pm Post subject:

There are no good companies unless you call US Steel a good company. Sure no mortgages there--but global building boom. No doubt. They've just come off the best earning possible for such a company: do they deserve to keep it? And punishment? Lehman debt is spread far and wide. Farther still GSE equity and debt--every bank in the country as a matter of fact. They won't be getting any money. As far as the money goes, it goes to those who ask--at a price. Isn't that the way you'd want it?

A steep yield curve looks like a big juicy piece of meat to a bank. To lock that spread in at today's deflated asset prices is just a matter of accounting for the accounting.

That said, I'd like a carrot too.
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Greystone1 · Newbie Joined: 23 Sep 2008 Posts: 9

It seems to me that we are getting ready to hand out carrots to those who deserve sticks, while doing nothing for those who deserve carrots.

Why not pump the bailout money into the companies that made the right moves, rather than the companies that made the wrong moves? Wouldn't that do wonders for the economy?

gregf · Posted: Wed Oct 01, 2008 10:11 am Post subject:

HenryTo · Posted: Wed Oct 01, 2008 9:46 am Post subject:

Greg, sorry, typo. I meant "done with their easing campaigns." The easing campaigns in the Euro Zone and the UK haven't even started yet. I am looking for both the ECB and the BoE to aggressively ease by the end of this year. I am also looking for the Fed Funds rate to be at 1.5% or lower by early next year. On a more direct basis, this will produce a much steeper yield curve for the banks - which will subsequently increase their net interest margins and encouraging them to lend more money. The indirect effects are numerous.