Trader Mark, pointing out that besides our personal investments doing rather poorly, perhaps, our collective investments aren’t doing so hot either:
We’re Down 33% in 1 Month on "Our" Investment
Courtesy of Trader Mark, at Fund My Mutual Fund
Talk about adding insult to injury – not only are our real investments being obliterated but even our tax dollars are being obliterated – "we’re" down 33% in 1 month. But don’t you worry, from government’s mouth to God’s ears, these are long term investments that will make us scads of money – just you wait. Unlike everyone else, the US Government is not a daytrader.
Foreign readers, I am sorry to inform you, you are not eligible for this once in a lifetime investing opportunity. Only those on American soil are so lucky to have this chance… please do not email me with your envious thought. I suggest immigration to take part in such bountiful excesses.
- Stock intended to eventually earn taxpayers a profit as part of the Bush administration’s massive bank bailout has lost a third of its value — about $9 billion — in barely one month, according to an Associated Press analysis. Shares in virtually every bank that received federal money have remained below the prices the government negotiated.
- Shares in virtually every bank that received federal money have remained below the prices the government negotiated.
- "We’re not day traders, and we’re not looking for a return tomorrow" said Neel Kashkari, the director of Treasury’s Office of Financial Stability, which oversees the $700 billion financial rescue fund. "Over time, we believe the taxpayers will be protected and have a return on their investment." (I believe Yahoo should be worth $150 – if only the market respect my beliefs)
- Most of the Treasury Department’s investments since late October have been in preferred bank stocks, more than $180 billion worth, with investments in giants like Citigroup and JPMorgan Chase, and many small community banks.
- But the government also negotiated options to buy up to 1.2 billion shares of common bank stock that was valued at $27 billion. Now, however, the value of that common stock is worth less than $18 billion. If the government exercised all its warrants to purchase the stock today, it would lose money on 51 of its 53 agreements. Taxpayers would be out $9.3 billion.
- "The markets are saying this plan isn’t going to work for the banks," said Ross Levine, Tisch professor of economics at Brown University. "They’re asking where this plan is going."
- Treasury Secretary Henry M. Paulson Jr. describes the cash infusion as "an investment, not an expenditure." So far, however, only two of the 53 banks can be considered a good investment. The AP’s analysis found that only HF Financial Corp. of Sioux Falls, S.D., and First Niagara Financial Group of Lockport, N.Y., would make money for taxpayers if the common stock options were exercised today.
The irony of all this is that this is really a heck of a scheme – the government can continue to funnel money into the banks via TARP and other Federal Reserve moves, which HAS to at some point push the stock prices up at which point they can point to themselves as excellent investors. When you control the money flow, the stock market should be quite the easy place to play. Just not so far.
The other Paulson by the way (the hedge fund manager who is dominating this market) [Nov 18: Paulson Buying Mortgage Backed Securities] , said the government was far too generous in it’s handouts… err bailouts… err investments.
- Hedge fund managers, who rank among some of the world’s shrewdest dealmakers, told Congress the U.S. government’s bank capital injection program did not have enough strings attached. "The current terms are overly generous to recipients," said John Paulson, president of hedge fund Paulson & Co.
- John Paulson — whose attack on the plan was dubbed "Paulson versus Paulson" by the lawmakers — said any bank receiving federal funds should halt cash dividends on common stock and restrict cash compensation to executives. He also said the government should demand a higher dividend payment from participating banks, possibly around 10 percent instead of the 5 percent rate now in place.
Don’t worry John, we’ll make money in the end; we’re not daytraders.
With tricks like this it’s no wonder
- More companies would be in the black, but the government used a 20-day stock price average to set the warrant price, meaning it willingly negotiated to pay roughly 25 percent more than the stock was worth on the day it signed the deals on behalf of taxpayers.
Excellent move!
- "It’s a complete mistake to think this is a good investment for us," said Paola Sapienza, a finance associate professor at Northwestern University’s Kellogg School of Management, who spearheaded a September protest of the bailout by more than 200 of the nation’s leading economists. "It’s a gamble. It’s like going to Las Vegas."
