Interesting read from Roubini who pretty much states the obvious. The US is effectively insolvent!
Down 100 right now on the dow. MLPS down around or a little less than 2 points on the index.
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- joewxman
- a meteorologist with a knack for trading and investing in MLPS! I also like horse racing, enjoy cigars and a good port wine.
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2 comments:
Unfortunately we're back to square one but worse.
The banks are still insolvent, the auto companies are still on the verge of bankruptcy, and the government is still incapable of the policy necessary to deal with the situation.
Here's what is needed right now.
1) Citi bank is at about a dollar.
All the government tarp funds extended ( to Citi ) needs to be converted to warrants at $20.00 a share. Similar appropriate numbers for all the other banks. Financials need to be made safe for investors.
2) Mark to market, needs to be replaced by discounted cash flow.
3) Rather than markdowns on valuations for existing underwater mortgage loans, if a mortgage loan is significantly underwater, the government needs to buy down interest for refinancing at 2% for 10 years (on 40 year amortization) . These "homeowners" essentially will become renters for 10 years with the possibility that should the economy and their credit improve they can qualify for mortgages then. The current owners of of the mortgages to receive the current 10 year Treasury interest rate about 2.84%. Their haircut will be on cash flow, and they will be way better off than if the whole system colapses. If a homeowner can't survive with a 2% mortgage at 40 years amortization schedule, they can't be helped and the property should be foreclosed.
3) For those mortgages not underwater, a government refinance guarantee to bring down refinancing to 4%.
4) No mortgage support for newly built housing.
5) Any Government mortgage support, limited to existing mortgage balances to reduce risk of new frauds.
5) Profits from short sales, and short ETFs to be taxed at 80%.
6) Maintaining current capital gains tax structure for profits on the long side.
Geez... I posted 2 # 5's.
Additional Fixes needed,
Auto Companies
1) Armed forces buying 4x4 pickup trucks at 20% discount off of list.
They aint Humvees , but no reason they can't be useful.
2) 50% Federal buydown ( at 20% off of list ) for other governments ( states, counties, city's ) to replace vehicles older than 3 years.
( limited to 2 million vehicles ).
3) "Forced" re-orginzation ala Ford, with unions, bondholders, etc
4) Capital made available to reorganized auto companies to insure their survival.
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Cap + Trade put off until markets recover
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CDS reform,
80% income tax on realized profits
on Credit default swap profits.
CDS transaction ( Tax) fee of .025% for covered CDS transactons.
CDS transaction fee of 2.5% for naked CDS transactions.
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