Jonathan Christopher

Sucker's Rally Approaching an End

Some things to consider:
1. VERY FEW PEOPLE buy "The Market". People buy individual stocks or basket of stocks.
2. At present prices, you can buy stocks at 20 cents on the dollar, just as you can buy houses at 20 cents on the dollar. Such a deal!
3. This bear market is really about 10 years old, but was hidden because much of the action took place sector by sector.
4. Those things people are mindlessly calling "Toxic Assets" - what are they REALLY? These are pools of mortgages that have been sliced and diced so many ways that nobody really knows what they own. But look at some numbers, -roughly speaking.
say you buy these "Toxic Assets". $1,000,000 face value costs $300,000. (Such a deal!) Of these assets, 90% are current, paying 6% of face value, producing $54,000 per year of interest income. The other 10% go into foreclosure, and you get 50 cents per dollar of loan, so that gives you $50,000 of return of capital for the ones in foreclosure (but that 10% only cost you $30,000 in the first place) . At the end of the first year you got $ 104,000 in income on the $300,000 investment. Not bad for these "Toxic assets".
4. Can you see why a bank might want to use 8% interest TARP loans to get 36%+ returns. Is this not a great deal or what?