[zzz]

Roubini wrote a piece today that we’ve become the USSRA (United Socialist State Republic of America). Its rather long and talks about the implications of the AIG “takeover”. Here’s a few paragraphs:

If we start bailing out those creditors of AIG (holders of bond insurance policies) we may as well nationalize also all of the other private monoline insurers. And we treat differently different bond insurers (we make whole those who bought bond insurance from a too big to fail AIG and we let go bust those who bought the same protections for a non-systemically important bond insurer) we exacerbate moral hazard as in the future no one will buy bond insurance protection from truly private and smaller bond insurers and everyone will buy it from large too-big-to-fail institutions such as AIG where such bond insurance comes now with the additional protection of an implicit government guarantee of insurance. So the US government may become – on top of the biggest insurer in the world with its takeover of AIG – also the biggest re-insurer in the world.

And how will the government decision to protect fully the small insured claimants of AIG (those who hold life and casualty insurance) affect the competition in the insurance business? If the government makes such policy holders senior to the government large and too big to fail private insurer have a massive competitive advantage relative to smaller insurance companies where the claims of the policy holders are at greater risk if the insurance company goes bust?

And, as in the case of banks involved in mortgages, where were the insurance regulators that were asleep at the wheel while AIG was using the policy holders premia not to invest into safe long term bonds but rather to insure toxic MBS and CDOs and other junk? Why were they asleep at the wheel while AIG was conducting the scam of the century getting involved into a business – bond insurance – that was toxic and caused its demise? Why was AIG allowed to become too-big-to-fail but letting it get into a business – bond insurance – where it should have not been in the first place and that caused its current bankruptcy?

So there are tons of questions that remain to be answered and the pathetic Fed statement of the Fed on the takeover of AIG does not answer creating much greater uncertainty and confusion. AIG should have been allowed to go into bankruptcy court and any government financial help to avoid systemic risk should have occurred in the form of a formal debtor-in-possession (DIP) financing. Bankruptcy court have laws and a judicial history of how claims of an insolvent firm are treated and they provide clarity to the pecking order of such claims while avoiding – via a stay – some creditors running and be made whole while others are inflicted – because of such a run – even greater losses. So instead of doing the right thing – pushing AIG into bankruptcy court and providing government DIP financing – the Fed and Treasury have formally nationalized AIG and they have created a legal mess where there will be endless confusion and lack of transparency of the government claims relative to junior and senior creditors of AIG, short term creditors and long term creditors, insurance policy holders of a traditional sort and of a non-traditional sort (life and casualty holders versus bond insurance holders).

So soon enough the transformation the USA into the USSRA (United Socialist State Republic of America) will be complete: we have defeated the USSRR to create a communist economy in the most advanced free market economy in the world. And calling it socialism (even socialism for the rich, the well connected and Wall Street) is giving a bad name even to a failed experiment like socialism; this is more akin to the creation of a corporatist state (like the Italian fascism or the Germany Third Reich) where private sector interest are protected (gains privatized and losses socialized) where the government is taken over by corrupt and reckless private interests.

[zzz]

Roubini wrote a piece today that we’ve become the USSRA (United Socialist State Republic of America). Its rather long and talks about the implications of the AIG “takeover”. Here’s a few paragraphs:

If we start bailing out those creditors of AIG (holders of bond insurance policies) we may as well nationalize also all of the other private monoline insurers. And we treat differently different bond insurers (we make whole those who bought bond insurance from a too big to fail AIG and we let go bust those who bought the same protections for a non-systemically important bond insurer) we exacerbate moral hazard as in the future no one will buy bond insurance protection from truly private and smaller bond insurers and everyone will buy it from large too-big-to-fail institutions such as AIG where such bond insurance comes now with the additional protection of an implicit government guarantee of insurance. So the US government may become – on top of the biggest insurer in the world with its takeover of AIG – also the biggest re-insurer in the world.

And how will the government decision to protect fully the small insured claimants of AIG (those who hold life and casualty insurance) affect the competition in the insurance business? If the government makes such policy holders senior to the government large and too big to fail private insurer have a massive competitive advantage relative to smaller insurance companies where the claims of the policy holders are at greater risk if the insurance company goes bust?

And, as in the case of banks involved in mortgages, where were the insurance regulators that were asleep at the wheel while AIG was using the policy holders premia not to invest into safe long term bonds but rather to insure toxic MBS and CDOs and other junk? Why were they asleep at the wheel while AIG was conducting the scam of the century getting involved into a business – bond insurance – that was toxic and caused its demise? Why was AIG allowed to become too-big-to-fail but letting it get into a business – bond insurance – where it should have not been in the first place and that caused its current bankruptcy?

So there are tons of questions that remain to be answered and the pathetic Fed statement of the Fed on the takeover of AIG does not answer creating much greater uncertainty and confusion. AIG should have been allowed to go into bankruptcy court and any government financial help to avoid systemic risk should have occurred in the form of a formal debtor-in-possession (DIP) financing. Bankruptcy court have laws and a judicial history of how claims of an insolvent firm are treated and they provide clarity to the pecking order of such claims while avoiding – via a stay – some creditors running and be made whole while others are inflicted – because of such a run – even greater losses. So instead of doing the right thing – pushing AIG into bankruptcy court and providing government DIP financing – the Fed and Treasury have formally nationalized AIG and they have created a legal mess where there will be endless confusion and lack of transparency of the government claims relative to junior and senior creditors of AIG, short term creditors and long term creditors, insurance policy holders of a traditional sort and of a non-traditional sort (life and casualty holders versus bond insurance holders).

So soon enough the transformation the USA into the USSRA (United Socialist State Republic of America) will be complete: we have defeated the USSRR to create a communist economy in the most advanced free market economy in the world. And calling it socialism (even socialism for the rich, the well connected and Wall Street) is giving a bad name even to a failed experiment like socialism; this is more akin to the creation of a corporatist state (like the Italian fascism or the Germany Third Reich) where private sector interest are protected (gains privatized and losses socialized) where the government is taken over by corrupt and reckless private interests.

[zzz]

I got out of most of my stock positions last week and the remainder yesterday afternoon. The rest of my equity investments are in my retirement account and I personally do not actively manage that nor move anything around given I have a long ways to go before retiring and heck, I’m dollar cost averaging. I have been out of Treasuries since last year since the yields were shit anyhow. I would not buy Treasuries right now even in they were paying 6%+ rates…anything is possible including our good ol government defaulting.

I believe unless you are “investing” longer term in specific stock( willing to wait out a gain over a multi year environment) versus trading specific stocks, you should probably cash in any gains you have in the next run up. I believe it will get a lot worse before it gets better and I personally did not want to get “stuck” in a few stocks for years. I believe there is definitely money for the taking in short term trading in this volatile market. Hedge funds love volatility, but since most of us are managing our own funds and not someone else’s money, I’d think unless you really know what you’re doing, you might want to just button down the hatches.

[zzz]

I got out of most of my stock positions last week and the remainder yesterday afternoon. The rest of my equity investments are in my retirement account and I personally do not actively manage that nor move anything around given I have a long ways to go before retiring and heck, I’m dollar cost averaging. I have been out of Treasuries since last year since the yields were shit anyhow. I would not buy Treasuries right now even in they were paying 6%+ rates…anything is possible including our good ol government defaulting.

I believe unless you are “investing” longer term in specific stock( willing to wait out a gain over a multi year environment) versus trading specific stocks, you should probably cash in any gains you have in the next run up. I believe it will get a lot worse before it gets better and I personally did not want to get “stuck” in a few stocks for years. I believe there is definitely money for the taking in short term trading in this volatile market. Hedge funds love volatility, but since most of us are managing our own funds and not someone else’s money, I’d think unless you really know what you’re doing, you might want to just button down the hatches.

[zzz]

I got out of most of my stock positions last week and the remainder yesterday afternoon. The rest of my equity investments are in my retirement account and I personally do not actively manage that nor move anything around given I have a long ways to go before retiring and heck, I’m dollar cost averaging. I have been out of Treasuries since last year since the yields were shit anyhow. I would not buy Treasuries right now even in they were paying 6%+ rates…anything is possible including our good ol government defaulting.

I believe unless you are “investing” longer term in specific stock( willing to wait out a gain over a multi year environment) versus trading specific stocks, you should probably cash in any gains you have in the next run up. I believe it will get a lot worse before it gets better and I personally did not want to get “stuck” in a few stocks for years. I believe there is definitely money for the taking in short term trading in this volatile market. Hedge funds love volatility, but since most of us are managing our own funds and not someone else’s money, I’d think unless you really know what you’re doing, you might want to just button down the hatches.

[zzz]

I got out of most of my stock positions last week and the remainder yesterday afternoon. The rest of my equity investments are in my retirement account and I personally do not actively manage that nor move anything around given I have a long ways to go before retiring and heck, I’m dollar cost averaging. I have been out of Treasuries since last year since the yields were shit anyhow. I would not buy Treasuries right now even in they were paying 6%+ rates…anything is possible including our good ol government defaulting.

I believe unless you are “investing” longer term in specific stock( willing to wait out a gain over a multi year environment) versus trading specific stocks, you should probably cash in any gains you have in the next run up. I believe it will get a lot worse before it gets better and I personally did not want to get “stuck” in a few stocks for years. I believe there is definitely money for the taking in short term trading in this volatile market. Hedge funds love volatility, but since most of us are managing our own funds and not someone else’s money, I’d think unless you really know what you’re doing, you might want to just button down the hatches.

[zzz]

I got out of most of my stock positions last week and the remainder yesterday afternoon. The rest of my equity investments are in my retirement account and I personally do not actively manage that nor move anything around given I have a long ways to go before retiring and heck, I’m dollar cost averaging. I have been out of Treasuries since last year since the yields were shit anyhow. I would not buy Treasuries right now even in they were paying 6%+ rates…anything is possible including our good ol government defaulting.

I believe unless you are “investing” longer term in specific stock( willing to wait out a gain over a multi year environment) versus trading specific stocks, you should probably cash in any gains you have in the next run up. I believe it will get a lot worse before it gets better and I personally did not want to get “stuck” in a few stocks for years. I believe there is definitely money for the taking in short term trading in this volatile market. Hedge funds love volatility, but since most of us are managing our own funds and not someone else’s money, I’d think unless you really know what you’re doing, you might want to just button down the hatches.

[zzz]

The market is far too volatile and emotional for me to come to any logical conclusions. The market is DESPERATE for any decent news that its actually rallying right now. I think from a longer term perspective its going to get a lot uglier which is no shocker and I think if you don’t have to spend any more $$ on anything, that’s probably the wise thing to do as you’ll need the cash. That said with our gov’t inflating us out of this and our dollar crashing, maybe we all should go out and buy homes. At least we’d have something tangible to show for it versus a bunch of worthless paper.

[zzz]

The market is far too volatile and emotional for me to come to any logical conclusions. The market is DESPERATE for any decent news that its actually rallying right now. I think from a longer term perspective its going to get a lot uglier which is no shocker and I think if you don’t have to spend any more $$ on anything, that’s probably the wise thing to do as you’ll need the cash. That said with our gov’t inflating us out of this and our dollar crashing, maybe we all should go out and buy homes. At least we’d have something tangible to show for it versus a bunch of worthless paper.

[zzz]

The market is far too volatile and emotional for me to come to any logical conclusions. The market is DESPERATE for any decent news that its actually rallying right now. I think from a longer term perspective its going to get a lot uglier which is no shocker and I think if you don’t have to spend any more $$ on anything, that’s probably the wise thing to do as you’ll need the cash. That said with our gov’t inflating us out of this and our dollar crashing, maybe we all should go out and buy homes. At least we’d have something tangible to show for it versus a bunch of worthless paper.

[zzz]

The market is far too volatile and emotional for me to come to any logical conclusions. The market is DESPERATE for any decent news that its actually rallying right now. I think from a longer term perspective its going to get a lot uglier which is no shocker and I think if you don’t have to spend any more $$ on anything, that’s probably the wise thing to do as you’ll need the cash. That said with our gov’t inflating us out of this and our dollar crashing, maybe we all should go out and buy homes. At least we’d have something tangible to show for it versus a bunch of worthless paper.

[zzz]

The market is far too volatile and emotional for me to come to any logical conclusions. The market is DESPERATE for any decent news that its actually rallying right now. I think from a longer term perspective its going to get a lot uglier which is no shocker and I think if you don’t have to spend any more $$ on anything, that’s probably the wise thing to do as you’ll need the cash. That said with our gov’t inflating us out of this and our dollar crashing, maybe we all should go out and buy homes. At least we’d have something tangible to show for it versus a bunch of worthless paper.

[zzz]

kev- with the ratings downgrade, not just CNBC, but the WSJ have indicated AIG is in deep shit and could go bankrupt as early as Wednesday. AIG is a very complex beast and the lack of transparency there doesn’t help confidence. Every bank has counterparty exposure to AIG however and the ripple effects would be huge.

Tomorrow will be an interesting if not frightening day.

[zzz]

kev- with the ratings downgrade, not just CNBC, but the WSJ have indicated AIG is in deep shit and could go bankrupt as early as Wednesday. AIG is a very complex beast and the lack of transparency there doesn’t help confidence. Every bank has counterparty exposure to AIG however and the ripple effects would be huge.

Tomorrow will be an interesting if not frightening day.

[zzz]

kev- with the ratings downgrade, not just CNBC, but the WSJ have indicated AIG is in deep shit and could go bankrupt as early as Wednesday. AIG is a very complex beast and the lack of transparency there doesn’t help confidence. Every bank has counterparty exposure to AIG however and the ripple effects would be huge.

Tomorrow will be an interesting if not frightening day.

[Author]

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