SilentP

The Geithner Plan FAQ

Agreed, you are technicaly correct. However, from the perspective of the private money, the leverage is effectively 30+ to 1, as they are putting up only 1 dollar to get buying power of 33 dollars.


On Mar 22 10:27 PM vaughn wrote:

> The leverage on the private public partnership is less than 6 times
> ( total capital will be 18% with 82% financing coming from debt guaranteed
> by FDIC and bought by private investors, such as pension funds or
> bond funds)

The Geithner Plan FAQ

The creation of the now toxic assets required massive amounts of credit to be available. Without credit, there is simply not enough cash out there to purchase these assets outright. The Treasury is simply restoring 30-1 leverage ($30B * 33 = $1T) to soak up some of the supply.

Add to that a deteriorating economy where no one knows where (or when) the floor on housing prices and consumer credit will be, it is not hard to see why investors don't want to jump in with cash to buy those assets.

"However, I still don't understand why private capital hasn't already bought these undervalued assets to make these profits?"

Ever Shop in a China Bull?

"look for Joe Qiu average to do what he’s been doing for a good long time now: buy gold."

Maybe the play is not on the global price of gold, but instead on the companies that supply gold to the Chinese consumer. Take a look at Fuqi International, (NM: FUQI), a wholesale supplier to the consumer gold jewelry market. Buying of gold jewelry by the Chinese consumer is viewed as a way of storing wealth (ie saving/investing) and less as a luxury item.

A pure play on the Chinese consumer demand for gold is Fuqi International (Nasdaq: FUQI), a leading wholesale manufacturer of gold jewelry that has achieved triple digit revenue and profit growth in FY 2008 as a result of becoming better capitalized through an IPO in Q4 2007. The company raised 2009 guidance several times since the IPO, including as recently as October which was accompanied with an explanation for the improved outlook that is consistent with Matt's analysis.

Disclosure: Long FUQI