Saturday, October 20, 2007

Contrarian Thought of the Day - October 20, 2007

I have been in a particularly contrarian mood lately so I am going to publicly disagree with whatever conventional wisdom I happen to read about. I hate hearing and reading the same point of view all day with everyone saying the same thing over and over. Don't take this personally if you are on the other side of these issues.

The Structured Investment Vehicle (SIV) Bailout Plan

This is a good thing. Psychology and confidence is everything in the financial world. Do you have any idea how much actual cash a bank keeps on hand to back your checking account? How about nothing up to a maximum of 10%. No public money is being used in this bailout so what's it to you. "We bought the sandwiches, and that's it," a Treasury official was quoted in the Wall Street Journal. The real question is will it work? Or is this the 21st century equivalent of Richard Whitney's walking onto the floor of the New York Stock Exchange in October 1929 and announcing that he was buying stocks.


Anonymous said...

Hey I'm all for devils advocate, but why is the treasury even buying them sandwiches?

These banks are big boys and if they have to liquidate and take losses by selling below their "mark to market" value, then won't their losses accrue to whoever buys their distressed assets? I have plenty of cash saved up and am willing to buy $.95 worth of assets for $.70 on the dollar....

It kinda sucks that the Treasury (who funds the US government, not investment banks) would be involved in a scheme that prevents decent hardworking americans (like me) from the opportunity to rip the face off some of these investment banks. I think I should at least get some free sandwiches too, at the very least. Troy P

Eric J. Fox said...

Troy P...I think maybe these guys have had their faces ripped off enough. We don't want to bring the entire house down.