Tuesday, October 14, 2008

What is the HALF-LIFE of the Bailout drug? 1-2-3 Back to reality…

When the temporary effects of the bailout drug placed into the hands of the doctors (Wall St and other financial services entities), the creators of this over leveraged, toxic debt induced time bomb wear off, or worse fail to perform the hoped-for-magic; what and how will Mr Paulson and Bernanke treat the patient aka the “real economy” consumer, consumption-dependent / capital expenditure-reliant corporate earnings?

POTS - Part of the solution:
DIRECT AID to the US TAXPAYER and to the underlying major asset class.
Tax support for renewed Real Estate investment as described in last blog.

Bailouts of banks and Wall St firms are NOT the solution to the REAL problem.
They band aid a fracture only, in fact, are nearly completely misplaced, misguided and misinformed use of US Taxpayer monies.

NEED we state the OBVIOUS again?
NOT ALL financial institutions are in trouble; most are / should be allowed to seize the present opportunities they (boards, management and shareholders) so patiently waited for by foregoing the illicit models and paper profits of yore and compensation thereon (2004 to 2007).

Repeating the CAUSE OF THE MAGNITUDE of this problem:
LEVERAGE - admittedly we would face a problem, more on the scale of OTS / Resolution Trust of the early 1990's; due to recent vintage homeowners having been allowed to own homes with no skin in the game required (i.e. no down payment).

TODAYS problem
WAS exacerbated BY WALL ST and related entities astounding piling on of debt / leverage to capture spread, in the relentless PURSUIT OF MAXIMUM PROFITS, regardless of the AAA credit quality assigned by the ratings agencies and or implicit Fannie Mae, Freddie Mac, Sallie Mae government-backed issuers. Oblivious (perhaps failed to or sorely and inadequately even performed due diligence) upon the true insurance capacity of the ultimate counterparty, major issuer of CREDIT DEFAULT SWAPS insurance; AIG.

With scant, if any attention to the fact that Real Estate, as an asset class, with a readily observable 200 year track record of low to mid single digit appreciation, that ejaculated beginning in 2004 and kept on ejaculating for 3 years - COME ON, GIVE ME A BREAK!

Where are (were) all the fans of ELVIS & Johnnie (Carson)?
Millions of Americans, listened to these artists with rapt attention FOR YEARS.
Did you realize the MOST IMPORTANT financial message was sent from their graves?
By their respective estate executors, in May 2006 both estates sold Real Estate - and it was noted in the proprietary "Fiduciary Alert" as a reminder to those in positions of fiduciary responsibility to assess, monitor and document the continued appropriateness (risk / reward) of
holding real estate; some "fans" may have been listening to "new, but fleeting" music.

It's not about being right, or lucky - IT'S ABOUT RECOGNIZING THE OBVIOUS, especially by those who know / and should have known better, with access to ALL the models, necessary information about asset-backed, mortgage-backed real estate-related securities; notwithstanding the stratospheric appreciation of homes in their VERY OWN NEIGHBORHOODS!! All the while, ignoring the dislocation, rather rupture of same value from jobs / job security, productivity and income.

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