« Should you buy municipal bonds individually or in a fund? | Main | What the large print giveth, the small print taketh away »

Why not double down?

"Mr. Geithner, who was closely involved with the AIG bailout, offers no change ... His latest scheme is called the Public-Private Partnership Investment Program. But there is actually very little private skin in this game: It gives a handful of wealthy financiers huge nonrecourse loans to enable them to purchase toxic assets that the market supposedly won't buy at a "fair" price. As the housing crisis has shown, providing subsidized nonrecourse loans creates asset bubbles, not true price discovery. And bribing buyers to ramp up prices smacks of market manipulation." Amar Bhide


The new program offers non-recourse debt financing at ~20x leverage to the hedge fund crowd. It is a free option of unprecedented macro scale: a massive call option on the taxpayer wallet at a 5% premium.   'Heads they win, tails the taxpayer losses again'.

So, form a hedge fund, buy the maximum you can. If it works, you're rich. If it doesn't, just walk away. You only have 5% down.  It's your best shot.

"a little song, a little dance, a little seltzer in the pants..." - Chuckles the Clown

If the hedge fund isn't working for you, consider buying TIPS & selling long dated treasuries.

PostPost a New Comment

Enter your information below to add a new comment.

My response is on my own website »
Author Email (optional):
Author URL (optional):
All HTML will be escaped. Hyperlinks will be created for URLs automatically.