The Geithner's toxic asset plan

Geithner's toxic asset plan involve a investor-government half-half investment on selected toxic assets in auction. The purchase will be financed in a 6 to 1 ratio. The leveraged position is guaranteed by FDIC. And the loan is non-course. Therefore, the risky position to the US government as a whole is the roughly the 7.5% partnership investment, plus the roughly 85% of leveraged guarrantee. The maximum loss to the investor is 7.5%, given the leverage effect, the return could be several times. The package must be widely welcomed by the capital. And it is reflected by the sharp rise in the stock market.

Many well structured financial plan is going to be prepared to extract the money from the gift package provided by the government. This plan is actually an attempt of further enlarging the US government's balance sheet by buying/guaranteeing the toxic assets. The only good is the invitation of private investment will help to price the toxic asset, while the private investor will be substantially rewarded.

If the toxic asset purchasing plan can really lead to a market price of those illiquid MBSs, how fast does the market pricing help the banking sector and thus the economy as a whole?
Can the value of the toxic asset correctly-valued? or distorted (overpriced) because of the government subsidy?

http://krugman.blogs.nytimes.com/2009/03/22/brad-delongs-defense-of-geithner/#comment-153095

SPX chart

Do u think that the triangle (from sep30 to Jan) is valid?
If yes, the S&P500 broke through the support of the triangle in Jan, should be bearish and target <800.

By fundemental point of view, the relative high P/E for S&P500, bad and worsening consumption spending(big weight to US GDP), seemed to support a lower valuation for SPX. The government bail out will trigger the problem of USD and US government debt.

Remarks:
1. the grey support line was broke through on Sep 30, followed by a huge drop, the support line seemed valid.
2. the fibonacci retracement accurately predicted the resistance at 938.1, the rebound from 741 came to an end at the 23.6% resistance and turn back down.

散戶自製ELI

ELI現在已經成為各大銀行之重點理財產品, 客觀來說, ELI產品有其一定吸引力. 好處是投資者可將自己的存款與優質股票(或其他資產)掛勾, 在定存息率基礎上增加額外回報, 年率回報5厘至30厘不等. 若市況與看法相反時, 只需以現貨之若干折扣價購入股票, 進可攻退可守.

可是ELI涉及售出看淡期權, 有如保險公司收了保費, 為投資者的損失作無限承擔. 若然市況嚴重惡化, 收了額外利息, 卻可招致嚴重損失, 甚至是全盤損失.

例如投資HKD100,000購入了掛勾某公司之ELI產品, 回報年率計8%, 為期兩個月, 利息收入1333.33元. 可是於到期日時該公司因為做假賬被揭發, 股價大跌, 投資者以九五折代價接了貨, 未及止蝕公司已停了牌等清盤. 那麼最大損失便是十萬元的本金, 期間只收到$1333的票息.

聽起來很恐佈, 但ELI一般與有實力的大型上市公司掛勾, 股價跌至零只是極端例子, 但投資需明白沽出認沽期權之implication. 在這個例子裡, 其實ELI的風險跟買入正股一樣, 還多了期權金的收益.
在陸sir 的blog裡面大家討論過有關投資銀行及中介機構如零售銀行食水深之問題, 究竟散戶能否自製ELI產品呢? 答案其實是可以的! 請留意以下例子:

今日路過某中資銀行, 掛匯豐HSBC 2 months ELI 折扣98%, 息價大約5.5%p.a. 其時匯豐做$145.4, 六月行駛價142.5認沽期權報1.8-1.86(02-MAY-2007 ~15:50)

匯豐接貨價: 145.4 X 98% = ~142.5
若購買ELI, 在六月結算日若匯豐收142.5以下, 需把投資ELI之本金以142.5換為股票. 若投資HKD100,000即獲得701股 (散股現金補償)

若要自製ELI的話, 投資本金需要和 142.5 X400X n手一樣, 以便對應期權, 期權交易是一手一手計的, 亦不用收碎股.
即造四手ELI, 我該拿出142.5 X 400 X 4 = 228,000的本金(另加按金)
造十手ELI, 本金就是142.5 X 4000 =HKD570,000(另加按金), 若要接貨, 剛巧接4000股.

製作方法:
1. 以即價沽出HSBC六月期沽期權10張, 獲得1.8 期權金, 收益為 1.8 X 400 X 10=$7200
2. 即日做兩個月定期HKD570,000(為準確計算, 應只造到6月28日期權到期日, 共57日), 該有3%p.a.左右, 到期實得利息570k x 3% x 57/365 = $2670.41

兩個月回報=7200-約200佣金雜費+2670.41=$9670.41
回報年率= 9670 x 365/57 /570000=10.86%P.A. (一年計之回報率)

比較銀行的5.5% 票息, 在相同風險與責任下, 只製ELI回報更高(10.86%).
若有錯漏, 還請高人指點.

注意
1. 只計票息, 不計因HSBC升跌之盈虧
2. 未計沽出期權所需繳付按金之利息, 按金水平請參考有關經紀或hkex要求, 利息約三百元)
3. 若有較佳之定期offer, 2個月定期利息應比3%更佳.
4. 實際執行會因小數計算及日期計算等有所不同.
5. 此乃私人投資研究分享, 不構成投資意見, 選HSBC 只是例子.

風險警告: 涉及期權操作需要深入的理論基礎及投資經驗, 否則會導致重大及無止境之損失, 投資者需審慎行事, 自行作充份之研究及諮詢專業人仕.