Monday, September 8, 2008
Financial Ground Zero, Trading Day's End
So, let's review, US government, which has 9+ Trillion of debt, now has 5.5 trillion of debt added to the books, granted, the 5.5 trillion has value, somewhere between 3 and 4 trillion, net loss will be over 1 trillion in the next 3 to 12 months.
Lets look at the Dow Jones industrial average for the last 10 days. The stock market rallied back to Wednesday of last week. You would think insuring 5.5 trillion dollars would have yielded better bang for the buck. To boot, the "stochastic" now indicates we are in "overbought" territory.
Do you feel like everything's fixed now? I don't. America is still going to lose jobs next quarter or so. Interest rates are now RISING instead of falling, not good for debt refinancing. I guess taking on 5 trillion dollars debt increases risk in the eyes of your lenders. Speaking of which, now that China got what they wanted, a bailout , China is now reconsidering buying more American Bonds. That's nice, US tax payer pays to bail out creditors, including China, and China wises up and gets out of dodge. Wonder if the tax payer will wise up and who will buy the new 1 trillion of debt.....
Now that USA bailed out Freddie Mac, Fannie Mae, 11 banks this year, it's now time to get ready to bail out Washington Mutual, who is ready to lose 40 billion the next 3 years. OK, if you know me, I am gullible, but I'm not that gullible. When since Enron has any company accurately forecast their losses? Perhaps it just might be under estimated.
No worries, there are more bailouts being sought, as I described in previous blog entry. In any event, FDIC is now next on the hit parade, as with more banks will fail as a result of the "bailout", pressure for funds will hit them next.
US government can't bail out every company, every bank, every debt, unless the government wants 1000% inflation. I can't imagine US government going completely banana republic printing press, that is how countries have revolutions. The big bailout of taking on 5.5 trillion dollars is now done. As a short seller, I have less to fear, can't get much bigger than 5.5 trillion bailout, additional bailouts will be small time. Fundamentals haven't changed, just who is taking the hit has. US creditors +1 trillion, US taxpayers -1 trillion, and its first inning.