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
2009年3月24日星期二
2009年2月5日星期四
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.