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Financial news I consider important, with my opinion, which is worth as much as you paid for it.
Please click HERE to read a synopsis of my view of the financial situation.

Monday, March 23, 2009

Taxpayer Bonanza Giveaway

This past weekend the treasury department announced plans to "facilitate" the trading of Mortgage Backed Securities (MBS). To read on how this works, I'll defer to Mish's article (click). (Also see Karl's analysis here) US Treasury Tim Geithner article on his spin can be found here.

The bottom line to me is still the same. The question people should ask, is the government's actions helping PROPERLY assessing asset values or changing laws to fix broken financial structures?
The answer to me a clear NO.
What is happening is the US Government will "facilitate" buying/selling of these assets at prices banks are willing to sell at. This translates to me as the taxpayer PAYING the delta between true value and value banks want to sell at. ONLY a free market buy/sell with ZERO guarantee on losses will properly value the assets. This action, is enough for me to create another "Financial Ground Zero" entry, which I may add later this week.

Back to the goal. The goal is to understand how to properly hedge in financial markets for the ramifications. And this SCREAMS market rally! Possibly month(s) of rallying. And why? Because its yet another money give-a-way to the banks and other financial institutions. The more the taxpayer takes on risk(losses), the more these companies have less of a chance of failing. (NOTE: This translates into INCREASE chance of US Government failure, risk cannot be averted)

My previous graphs of reward to risk still apply, but the game is attempted to be rigged by the referees. If they are successful, the upside reward is greater than the risk.

I still like resources, I am still cautious on gold, but bullish on index funds, Oil, Food, health care, and lottery tickets.
For those with higher risk tolerance on a long term view, India and China funds.

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