U.S. Stocks Rally on Federal Plan to Shore Up Financial System

great! more loses for the tax payers to eat!

the republican mantra - "privatize the profits, nationalize the losses"

Petrfitz, you are a fool. The Democrats that have had oversight responsibility in Congress have nothing to do with this, right? Dodd, Biden, Schumer...These are political hacks that are mere stooges for Finance. Actually, the only people complaining are Shelby, Bunning, Paul, all Republicans. But I am a Conservative, so politicking here does not interest me. I will give Paulson/Bernanke credit for driving a hard bargain on AIG, and in the process hammering out a good deal for the Fed. And before you make some moronic comment on that, I am merely echoing the words of the co-C.E.O. of Pimco, who knows more about these issues then you ever will.
However, if you are so immature as to think that Obama is actually up to the task of being an effective President, then you yourself cannot be taken seriously.
As usual, Steve is correct. The one thing I like is that Congress is pretty much staying out of this and letting Paulson solve the problem, which is good, because we all know that Pelosi or Reid would just fuck everything up by posturing for the next election. These are real problems, so we can't let the children in the room to distract the adults.

"Ignoring comment by petrfitz," so I can't comment, but if this report is true, then it could mark a turning point. This entire crisis was unnecessary and stupid. Remove the mechanisms designed to dampen market fluctuations, and of course the market will fluctuate wildly.

I have a lot of work to do to make up what I lost - I reckon it could take a year to earn what I lost in 2 weeks - which is entirely my fault because I lost my own investing discipline for the first time ever, and paid attention not to what the stocks were doing, but to the fundamentals and what they should be doing. A hard lesson.

Paulson and Bernake - despite what they have cost me - are people like the rest of us, and imperfect. If LEH, BSC, MER, AIG, Fannie, Freddie went under, and WM, MS are next, we can all make mistakes: even the best. They seem to be getting it right by not lowering interest rates, but they've been wrong so far about deregulation.

It doesn't change my views on Manhattan real estate or our Wall-Street driven economy, but it sure might change my feelings about the stock market. Before I do anything further I am going to wait and see what the government is planning, and watch how the markets react to it.

> great! more loses for the tax payers to eat!

Every day, perfitx seems to get dumber. All but one of the points have nothing to do with taxpayer money, just bringing order to the markets. Meaning the taxpayers will do *better* without their 401ks tanking.

Let it be said that I no longer read petrfitz, but the government MADE money on the RTC. If it sets up a similar one, it will likely make money.

nyc, my 401k was saved because thankfully I was 50% invested in cash since March. I switched to a 2x bear fund but today canceled all other orders for such funds, and may switch out of the ones I have if the government comes up with a rescue plan.

This crisis is very easy to solve; it was entirely unnecessary. What won't be so easy will be to recover all the lost wealth.

It pains me to read how sound the BRIC economies are, while their markets are falling 50%. Once the direction is set, however, I anticipate they will rise again as quickly as they fell. A US government plan might just set the direction.

stevejhx: "Elimination of mark-to-market" is a bit extreme. The accounting standards crowd faces an interesting challenge in trying to fix mark-to-market without abandoning it altogether.

Saying the government/taxpayer "made money on the RTC" might be an oversimplification. The asset sales were successful, but that doesn't mean the overall impact on the Treasury was positive. I admit I'm rusty on the numbers. Fifteen years is a long time.

"The accounting standards crowd faces an interesting challenge in trying to fix mark-to-market without abandoning it altogether."

Just change it to a discounted cash-flow model, and it will smooth out the gyrations.

i wouldn't get too worked up on the rtc/rfc rumors making the rounds. first of all, the rtc only accepted assets of failed institutions. trying to change that and have non-bankrupt institutions be able to sell bad assets into rtc would be almost politically impossible since this is effectively using tax payer money to bail out all sorts of private shareholders. i.e., if such an rtc bought all of morgan stanley's troubled assets, morgan stanley stock would rip and taxpayers would foot the loss. the fed holds the line on bailing lehman and suddenly they are going to bail out every private bank rtc style? rfc a whole different story...

"i wouldn't get too worked up on the rtc/rfc rumors making the rounds."

Which is why I changed my mind again and want to be in cash. I've lost enough in this volatility - until they come up with a workable solution, it's too dangerous.

stevejhx: re. discounted cash flows/NPV: If only it were that simple. Did you ever try to project the cash flow from an IO or a PO? And those are relatively straightforward structures. I can build you a model to generate the expected payments and price them, but the answer will depend more on your art (the assumptions you plug in) than my craft (the model itself).

Mark-to-market may be hypersensitive to liquidity fluctuations, and it may misprice non-generic assets because of false analogies between instruments; but at least it ties asset values to something outside the trader's head.

"Which is why I changed my mind again and want to be in cash. I've lost enough in this volatility - until they come up with a workable solution, it's too dangerous."

That's probably a good move. Things are really emotional right now. The more money you've lost, the more emotional you become. Either excessively bearish or bullish. I've seen a lot of smart guys at top funds get burned this year flip flopping trying to call a top or the bottom.

I can't believe how Streeteasy is dominated by the unemployed/underemployed/daytraders/people with no real experience.

This one takes the cake: Just change it to a discounted cash-flow model, and it will smooth out the gyrations.

Anyone who has actually worked in finance would laugh at this.

"but the answer will depend more on your art (the assumptions you plug in) than my craft (the model itself)"

As a former bank auditor, I can tell you that estimations like that are made all the time. If the portfolio and the valuation published, then the market could make up its own mind about the result.

It's not a good idea to mark a long-term asset to a short-term price, unless it is currently for sale. Imagine if you own an apartment that has gone up 25% in value from what you purchased it at, you have no intention of selling it, yet were forced to pay income tax on that 25% increase in equity. That is what mark-to-market does, in both directions.

That's why property taxes are inherently dumb - you have to pay them whether you make enough money in a year or not.

It may, however, be possible to combine discounted cash flow with some form of mark-to-market - the key is to make it transparent so the market can decide.

"Anyone who has actually worked in finance would laugh at this." Really, AnneC? Well you'll be happy to know that I got the idea from a former director at the Fed, on Larry Kudlow.

Sorry to burst your arrogant little bubble.

The only thing I'm now officially long on is China - it's reflating its banking sector and economy. I just bought FXI (not much) after having liquidated it on its way down. The government has made it quite clear that it intends to support the stock market and the financial sector, after letting it decline 64% to dampen inflation. That loss of wealth is affecting its ability to grow. It's now back on the table to recover at least 50% of its losses in the short- to medium-term.

On the next dip I may sell some of my short funds - I'm not sure I'm ready to sell them all, however.

Things are clearing up. Action is finally being taken. Yesterday I thought we were headed to Dow 8,000, and I wasn't alone. We won't be out of the woods until they figure out how to fix the credit problem, which - unbelievably! - they are working on tonight.

SteveJHX: You have an employer sponsored 401K that offers a 2x bear fund? That must have been a slip of the tongue; perhaps you meant an IRA?

and Cuomo (yes a Demoscrat) is going after crooks like Peterfitz

New York Attorney General Andrew Cuomo plans to investigate rumor mongering and illegal conduct. "The markets need to be stabilized," Cuomo said. "One way is to root out short sellers who spread false information."

"You have an employer sponsored 401K that offers a 2x bear fund?"

No - I am my own employer, I have a self-employed 401(k), and I can put in it anything I want.

JTighe, Cuomo isn't interested in petrfitz. He has a chauffeur-driven Prius, for christsake.

stevejhx- "I just canceled orders for 2x bear funds. The government is too unpredictable"

Now you see what I was talking about, shorting is suicide and going long is not the time. It's all just stupid.

> I have a self-employed 401(k),

Do you mean an SEP or something magical?

"shorting is suicide"

No it's not. Had I done it when my strategy called for it, I would be twice as rich instead of half as rich. I looked (stupidly) at fundamentals - the market was looking at fear.

"and going long is not the time."

I don't know about the US, but it is in China. Read what they're doing - reflating banks, restarting the economy.

"It's all just stupid."

No. You have to move with events if events mean changing fundamentals. The government was doing nothing about this crisis - that is fundamental. They switched course. That is fundamental.

"Do you mean an SEP or something magical?"

No. I mean a self-employed 401(k). Look it up on Fidelity. Similar to a profit-sharing plan.

"Now you see what I was talking about, shorting is suicide and going long is not the time. It's all just stupid."

Shorting is suicide when an increasing socialistic government arbitrarily changes the rules of capitalism. Otherwise, it's a very useful tool to hedge, make directional bets, etc. As for going long, I think ST market keeps rallying on momentum from the plan so if you are a day trader, probably stand to make some money here. It is becoming increasingly clear that the Bush administration could go down as the worst in history.

What an absolutely ridiculous couple of days (weeks) ((months)).

I got lucky on this one in the past week, market-wise, and today also looks to be pretty amazing. But this RTC thing is the "the greatest story ever told." And all this after the AIG bailout! I don't know if Paulson is doing a good job, because the dust hasn't settled yet, but he certainly is taking care of his own. And this after the injection of $180B (!) yesterday morning didn't clear the markets.

So can someone explain to me exactly what's happening with LIBOR?

malraux, I agree. The screwy thing is that everything I was forced to liquidate because of margin calls I'm now buying back at a lower price. (Not the same ones I sold though, to avoid the wash rule.) It would have been so much easier had they figured this out before they let Lehman go bankrupt, which is what caused it all, because I - and many others - was fine before that. I guess they figured out that had they let this go on, it would have led to a depression.

How dumb. How costly. I have huge tax losses meaning I won't have to pay capital gains tax when I sell my co-op, I won't have to pay capital gains tax for the foreseeable future, any gains made in mutual funds will be offset by these dumb losses.

My head is spinning from all of this.

LIBOR fell 200 basis points overnight. Neat, ha?