Massachusetts
Stocks fell today as the Republican win in Mass was built into yesterday’s gain, so today could be the profit taking day.
The Dollar strengthened again today, and bond interest rates eased in response, and gold fell significantly in response, and oil/gasoline fell in response.
In the news today….
AIG good news – the FED took a bunch of CDOs as collateral from AIG when it bailed it out. The face value of these CDOs was $62.1B, and the market value was $29.6B. The current market value is $45B, a tidy profit. So, the question is: “Who will get this profit?” Naturally, I think it should be the taxpayer – either directly, or indirectly through the FED.
Student Loan Companies – would be nationalized under a bill in the Senate right now. The current situation is a mess in my opinion because the government has its fingers inside these companies; telling them exactly what they can do, and how much money they can make. Nationalizing the process would save the government about $5B per year – a huge amount. In fact, this amount shows why the government should not be involved in anything. Almost everything it touches costs more money than anyone could imagine. My idea is that this whole industry should be rethought – it isn’t working effectively right now, and could use a complete makeover.
Tonight’s Dinner Conversation……
Mass voters have spoken, and spoken loudly. This was a watershed vote, and will probably go down in history as one of those “turning points” that changes everything. There are many less obvious changes that will come about because of this result, and here they are:
- The FED has created $2TRILLION in money during 2009. People are now aware of this. There will not be a second Quantitative Easing (printing money) episode in 2010.
- Congress will not pass a second Stimulus Bill even though the Administration wants one.
- The “belt tightening” talks that will follow are Dollar positive and Gold negative. However, these will be short lived (6 months in my opinion).
- Tim Geithner may be the scapegoat for Obama. I think the Administration will have to blame someone, and Geithner is a target.
- Stocks should be positive by this news. However, the market looks out 6 months, and the economy is slowing down then; so stocks don’t look too hot either. While they are not a “short” play, they could be sometime soon. So, don’t be confused by the rhetoric surrounding the vote.
- Social Security is broken, and won’t be fixed in 2010 as all eyes are on “health care.” The fix for social security will be next year (maybe) and the delay is devastating to the outcome.
- Fannie and Freddie have a negative value of $500B, and no politician wants to expose this detail in an election year. You will probably see their CEOs pay being capped, but that’s all. This is another BIG problem that must get fixed sometime.
- State budgets are a mess. Especially California and New York. There will NOT be any federal bailout of these states, and each state must cut deeply to balance its budget. This will be painful, and will be a consequence of the fiscal responsibility that will sweep through the nation right now.
- Congress will start beating up the big banks even harder now. Congressmen/women who want to keep their jobs will jump on the bankwagon and support the general feeling of the population.
- Bailouts are dead. There will be no more bailouts. If GM wanted one today, they wouldn’t get it.
Here are the last numbers for today:
Dow Jones 30 Industrial – 10,603 (down 122)
10 Year Treasury Bond – 3.66% (down 0.05%)
Euro – $1.4107
Gold – $1112 (down $27)
Oil – $77.15 (down $1.87)
Gasoline – $2.03 (down $0.03)