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Dec 10, 2008

I wrote about the FED’s latest plan to buy troubled assets (sub-prime) from the GSE’s (Fannie Mae and Freddie Mac) on Nov. 25.  I questioned why the Fed was doing this and not Treasury, wondering if the Fed was just going to invent the money rather than sell bonds.  I was looking at the New York Federal Reserve web site this morning and low and behold….

Question:   Will these operations be reserve neutral?

Answer:      No, these operations will be financed through the creation of additional bank reserves.

Bold face is mine.

Here is the web site if you would like to read all about it!

http://www.newyorkfed.org/markets/gses_faq.html

This revelation is in the Q&A posting dated 12/03/08.  It is about halfway through the Q&A.  They are only talking about $100 billion rather than the $600 billion that was announced 11/25/08.  I am trying to find the other $500 billion.  Maybe I can find it down in Oklahoma at the rattlesnake hunt, I will look next spring.

To put a smile on your face, or as a taxpayer feel sorry for yourself, check out You Tube  “12 Days of Bailouts”.

http://www.youtube.com/watch?v=55xJnIqq9ZI

The Bottom line is the bailouts continue, Detroit automakers are on deck right now.  The taxpayer and his children are being loaded with more debts at an amazing rate.  The same thing was said last year, and the year before, but now it is in breathtaking proportions.  The national debt clock is now over $10 trillion, it has increased 10% in the last few months!  The total debt of our country in 230 years has been increased by 10% in less time than it took to write the Declaration of Independence.

The market is waiting on the fate of the “Bailout Bill” for Detroit.  We are trading sideways waiting for some news.  The market will take a rescue as a positive, but I think a defeat of this bill will be greeted neutral.  The apprehension is on the indecision!  Do not get me wrong, there would be a violent reaction on auto and supplier stocks if the bill is defeated, but it would pass quickly.  The short term bear rally remains after today’s trading.  Hold on for the ride.

WARNING:    The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions. It may contain errors and you should not make investment decisions based solely on what you believe you have read here. Do your own research, it is your money. If you lose it, it is your responsibility, not ours or your grandmothers! The editor may or may not have a position in any securities discussed. The editor may have held a position in a security earlier, or in the future.

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