I thought some of you might find it interesting reading. We have substantial investments with Fidelity and they e-mailed out this analysis to investors. Not sure if it would be biased or not, but since they're supposedly looking out for their investors I'd figure it to be a decent analysis. It's long, and I haven't been able to read the entire thing, but it's interesting as it includes some history and other valuable information that I find valuable as someone not an expert in macroeconomics. Fidelity Investments: It also links to some other analysis: Fidelity Investments: Mutual Fund Market Analysis
Basically what it says, in a nutshell, is that if the intrinsic value of the distressed assets is above their market value, the government can buy them and make a profit in the long term, while infusing needed capital into the system, and in a best-case scenario jump-starting the system, encouraging investors themselves to begin buying the assets. But if the market value accurately reflects the intrinsic value, and the government pays over market value to inject capital into the system, the taxpayers will foot the bill. And it says that determining the intrinsic value of these assets is extremely complicated, in part because of the way the assets have been cut up and re-bundled. It also says that historically, injecting money into the system soon after a crisis is more likely to catalyze a recovery, whereas waiting can lead to an extended crisis. It does not say who will make the determination of the value of the assets or who will administer the program. It says that the bill also includes $150B for the extension of tax cuts.
I'm not sure the present experts in macroeconomics are the right ones to be listening to. What is making the airwaves as economic wisdom seems suspect. The absolute best description of what is happening was described as dumping blood into a hemorrhaging patient with no effort to fix the hemorrhaging, just dump money into the system to make up for the losses. I read the analysis. The most revealing aspect was the claimed impossibility of determining the worth of the derivatives and securities involved. Is this really the case?
Actually whats really telling on all this, if this had been a true bailout and the country had the funds, then it would have been somewhat realistic to expect the damage to be contained, but since the country does not have the funds, and is engaged in two wars and massive spending of debt, it just adds to the debt and is compounded by interest. Basically, yeah we may recoup some to much of the funds, but the debt interest will lose all advantage.
