I checked your link to the "leaked" deal. I couldn't get it to load. RE: Buffet. Buffet is Buffet. His investment in Goldman is I think his believe that Goldman will now survive the event. Without Goldman changing over to a bank charter, it would have been probably no deal. He believes that the govt has no choice but to pass something and that something will be enough. His time horizon is long, we have to understand that in guessing what he is thinking about the current event. Lastly I will say that no one is perfect. Even Buffet. He stands to have make a great deal if Goldman survives.
Here is what I believe. I believe that the government is the only entity that could pull us back from the deep dark hole. Even with the government pulling, I don't believe the probability of success is 100%. It will depend on timing. Most people are concern that we do this fairly so govt/us guys don't take a bath. From some of my posts, others may think that is my concern also. But my real concern is the HOLE, not the trying to make 7% return on the govt's investment. People are debating what to do with the windfall. That is just unreal to me. I believe at this juncture, Paulson and Bernanke are correct in going to market with a large $ amount, buy junk above market, and move the economy back from the hole. We can try to face down the HOLE, but the HOLE would sooner eat you than anything else.
I don't think P&B really expected congress to buy what they had to sell but they had to try. Now congress is going to do it and protect the public. Seems like everybody wants a rate of return on a Rescue from the biggest problem we have had since the depression. This is no mere blowup. It is a Cat-5 hurricane. In the middle of this hurricane, congress is negotiating the price of shutters, waters, and stuff.
My bottomline in my mind is simple. Somebody has to step up now and take on all the risk of loss. That somebody is the only warm body, the government/public. Some amount has been written off by the banks, etc. They can't write off much more/any more without going under one here and there. In the meantime, the system is freezing up here and there and forecast is for a period of sub-zero weather. It doesn't really matter if there is a return or not on the junk. I try to remind myself this is not an investment but a Rescue. Do what is needed to rescue first and if there is a return, excellent. But the idea that people are missing is that the government, the public has to step up and take on the full risk of the system without regards to compensation. It is loss avoidance that is freezing the market. They can't bear it anymore. How is loss avoidance by the govt going to help the situation?
At this point, I think what is likely is that we get a package from congress Friday or Sunday. It is not going to be enough. We will wait, it will get scary, maybe very scary, and we will repeat. My hope is that the second go around will be "good enough". As I wrote before, I hope I am dead wrong. |
