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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: patron_anejo_por_favor who wrote (109170)3/11/2008 10:43:26 PM
From: A Horse With No NameRead Replies (3) of 306849
 
this post from the wallstreetexaminer says it all

Lee, that was a very poor analysis of today’s action. Here’s a more complete description:

1. The Fed is lending treasuries and taking back mortgage securities that currently have a very poor market value. Think about it. Let’s say you’re Bear Stearns and are sitting on billions of crap mortgage securities. You’ll now be able to trade those at FACE VALUE for treasury securities. Instant liquidity. The Fed just bought those crap mortgages at full face. Sure, it’s considered at 28 day loan, but it will be extended indefinitely. This is true helicopter money to the tune of $700 for every person in the United States except that only banks and Wall Street are getting the money.

2. What does this do? It frees up $200 billion for lending and speculating. You think that makes no difference? You’re wrong. It makes a big difference.

3. The write-downs will now stop on mortgage paper. The Fed has now backstopped market values on mortgage paper. No more write-downs means more capital available to lend and speculate.

This is a very big deal. That $200 billion will have a multiplier of at least 10 and account for $2 trillion of buying power just unleashed into the markets.

This won’t begin until March 27. Add in another 50 basis point rate cut on March 18 and we are off the races.

Cover your shorts now or get burned badly.
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