Good Afternoon Folks!
Just a quick note today. It appears that once again the financial world will be saved by another government bailout. CNBC is reporting that the government may buy $100 billion of bad assets from Citigroup. Here is the word from CNBC:
"Update: The government is looking to buy substantial amount of assets from Citi like a good bank, bad bank structure. The government will absorb much of the losses for Citi if there are losses and Citi would issue preferred stock to the government.
The Feds could buy more than $100 billion in the bad assets if the plans go through. But that doesn't mean it will pay Citi $100 million. The deal is not finalized but could be announced tonight. Reports from Washington say the White House is unaware of any government talks with Citigroup. It also decline comment on whether President Bush would back a government rescue of Citigroup."
We could hear the details as early as tonight. It will be interesting to see how the markets absorb this tomorrow if the government goes through with this. My guess is the financials could rally.
I think at some point the bailouts are going to start triggering selling versus buying. Investors are rapidly losing confidence in the financial system and the economy as a whole. This is what happens when a stock market loses 50% of its value. Many are starting to ask themselves "when is this ever going to end".
I am asking myself the same question. Citigroup has $2 trillion dollars in assets so this one probably had to be done. Imagine Lehman Brothers x10 if they went down. What scares me is as the the Feds balance sheet grows, and their ability to fund it becomes more and more difficult, what are they going to do? There is only one answer. They must stop spending or the bond market is going to dislocate.
My hope is that they understand this versus continuing to spend in a panic as the economy falls off a cliff. Bubbles must burst and this country needs to start becoming much more fiscally responsible so thet we can pay off this massive debt. The only way we do this is by higher taxes and less government spending!
The government at some point must send a message to the corporate world by saying no to a large bailout and letting someone fail. Ben and Hank know we don't have the money to continue and do this.
When that moment arrives and a big company fails, the markets are going to head into a tailspin.
Congratulations Pigmen! You sucked another $100 billion out of the taxpayers.