InnocentsAbroad

11 Comments

    • ON: Tue Sep 23rd 22:40 PM
      Commented on:
      Paulson/Bernanke: $700 Billion at 'Hold to Maturity' Pricing
      Incredible. According to Paulson and Bernanke, they don't want just the desperate to come to the auction. Am I missing something here ? Washington is crawling with lobbyists being paid $300 an hour to get a piece of the pie for their clients. Everyone wants in. The banks, the hedge funds, the Europeans. I'd be surprised if the Russians don't want in.
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    • ON: Sun Sep 21st 12:57 PM
      Commented on:
      Read It and Weep for the USA
      The notion that the alternative to handing over bailout cash to the richest people in America and Europe, is "the economic downfall of global economy" -- that might be a false dichotomy. The alternative is a skillful use of the financial prowess of the US government to purchase assets at market value. and have a share in any benefits from a market recovery.

      That does not mean subsidizing bad investment and contractual actions by the money center banks and investment banks.

      For instance, what kind of collateral are being put up for loans by the Fed ? (for example, the loans to JP Morgan and Lehman). How is the U.S. government going to participate in recovery of equities in the financial sector (if and when ).

      If the U.S. government simply hands the money over, no questions asked, the whole process ends up sounding like an extortion, or payoff.

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    • ON: Sat Sep 20th 23:17 PM
      Commented on:
      Hank Paulson, Buy-Sider
      I have an idea whereby you are (in my imagination at least) guaranteed a fair price for the toxic assets. If the owner prices them, then at the point they get bought by the US govt. the equivalent in equity (book value) is also transferred (in stock shares or warrants) to the gvt. as well. If the toxic assets are overpriced, it pushes up the total value of the equity transferred, and so a larger part of the total fractional equity is transferred as well.

      In other words, a higher price for the toxic assets should be matched by larger dilution in ownership in the form of the coupled warrants or stock transferred to the US gvt.
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    • ON: Sat Sep 20th 16:17 PM
      Commented on:
      How Bernanke Stunned Congress with the Truth
      Let's see. Reflated dollars will be used to purchase deflated (delveraged assets). Sounds like a good buy. That is, if the purchase is at arms length. But -- how is the Treasury Department going to set prices ? No details in any of the plans for the bailout. If the assets cannot be sold, then they probably are not worth anything.

      However, other than paying more than the assets are worth, there is a much simpler way to price. The investment banks, and the money center banks, have senior debt, priced on the open market. Why not take the 1.2 trillion, and slowly but surely, purchase the senior debt (and maybe the commercial paper as well) at open market prices.

      Have the US government hire some canny junk bond traders to purchase the now junk bank and investment bank senior bonds at market prices. Make the actual purchase plan a state secret, with the penalty of life imprisonment in the Texas Correctional system for anyone corrupting the process (that's the Huntsville Correctional Center). Market prices for the securities, and re-liquidification of the capital markets. Any questions ?

      That seems to me to be the issue. How are the purchased CDOs to be priced ?
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    • ON: Wed Sep 17th 00:06 AM
      Commented on:
      Russian Oil Is Worth the Risk
      Purchasing shares based on geopolitical assessments seems not a very solid bet. The proper question, it seems to me, is how much of their national product are the Russians willing to let go of to get capital for industrial investment. I would posit that a possible gauge of this is the actual importation and installation of best technologies in the Russian ports, pipeline, and well heads. Only companies like BP or CP really know those details So non-Russian companies with good strategic skills might be a better bet than the pure thing (unless of course, you speak Russian and can make friends easily with their petroleum engineers and technical managers).
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    • ON: Tue Sep 16th 22:44 PM
      Commented on:
      AIG Bailout: Over to Congress
      Say, for the sake of argument, that AIG is a potential going concern. Then, we can make the reasonable argument that if the US government is the recsuer, then the US gvt gets the assets; ie all the equity in the tail, and all the equity in the good assets, and with the capital put in being allocated to the senior debt in the broken up pieces, plus nominal cash price warrants. Now, is that what happened ? No. The good assets are going to be sold at firesale prices. The US government isn't going to buy those. What about the US government provided debt ? Is it the most senior ? In other words, no, this is not a deal to save AIG / and its businesses as a going concern. It is a deal to save AIG's business partners from losing their shirts on bad business transactions. Companies that improperly hedge their derivative contracts are not the America people's foster children. End of story.
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    • ON: Sun Sep 14th 17:55 PM
      Commented on:
      Crunching Numbers: Why I'd Buy AIG
      Puzzled as to how one can quantify a company's worth if you don't quantify the value (or present value, and leverage) of their off balance sheet items. That would, for AIG, include the as present non-pubic derivative contracts that they have entered into. It is the value, risk, and leverage of those derivative contracts that, (at least it seems tome, ) are being priced into the share price.
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    • ON: Sun Sep 14th 17:14 PM
      Commented on:
      AIG: The Mark-to-Lehman Market
      Suprised there isn't an ETF that is composed of CDOs. Perhaps American investors are so imitative that the CDOs are considered to be worth nothing at any price. An ETF for the CDOs would provide a vehicle for potential purchasers, and a potential source of liquidities for holders.

      A fairly simple proxy would be an ETF composed of the senior debt of ML, Lehman, Goldman, AIG, etc. Or, potentially, a closed end bond fund with that specialty.
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    • ON: Wed Mar 26th 14:43 PM
      Commented on:
      The Fed is Deflating: 10 Reasons Why
      When incomes drop and prices rise, consumption as a whole may decrease -- thus leading to drops in prices of commodities that only have an internal American market. If that is true, baseball park tickets should be less expensive. So, if that is true, this is a good time to go on the Green Bay Packers ticket/owner list.
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    • ON: Tue Mar 25th 19:48 PM
      Commented on:
      Treasury Market: Deleveraging Continues
      Yes. This is an article, and a darn interesting one. Thanks to Seeking Alpha for brightening my day. Now I get to go and check out how the bond yields are responding.
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    • ON: Fri Mar 14th 20:49 PM
      Commented on:
      Repurchase Agreements and Covert Nationalization
      Umm -- could it just be simpler to say that the Fed is giving 11% - 3% times 200 billion ($14 billion a year) to prop up a leaking vessel (i.e. the Bush War and the US car economy). Doesn't seem so expensive, particularly by War Economy standards. Will it work? Maybe.
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