phat cat

Do You Believe Borrowing Leads to Prosperity? (Part 2)

Hi James, where and what farms would you recommend to buy?

Default Risk for Key Financials

These CDS levels are only meaningful if the counterparty who sells it to you are solvent. Just some other levels, UK is at 45, State of Texas is at 78, State of New Jersey is at 135. China is at 119 (they are the largest US treasury holder btw). I saw even US is trading at 30. Who ever is looking to buy CDS on US Treasury is completely nuts, who's guaranteeing the seller?!! While this whole system is breaking down, a lot of things are getting mis-priced. So I really wouldn't pay too much attention to these numbers.

Wall Street Bankers: Rewarding Failure

There is another take on this. As most of these financial stocks have plummeted over 60%, some even more, there's a tax consequence to those who are granted stocks. Assume at a tax rate of 35%, if those bankers have not sold their company stocks, they are essentially paying all the bonuses to the IRS. For those unfortunate ones who's stocks drop below that threshold, they are in negative territory. So everyone should just relax as everything works out at the end.

The Weakness of the Treasury's New Bailout Plan

One thing I learned from the '97 Asia financial crisis is not to bet against the government. The date the HK government intervened in the stock market was the date the market hit the bottom.

Now we have a concerted effort by virtually all the governments in the world (minus iceland) on board to fight this beast, it'd be foolish to bet against them. I don't care how much the hedge funds have in their control, you are fighting against the guy with the money printing press. And where can you go if you don't like what the US is doing? Everyone is on the same boat this time! Look around, the Europeans are in even deeper, and the Asians are panicking even more because they need customers who buy their products!

In short, people, let's quit the doubting and move on try to make the plan work.