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  • November 19, 2008 04:19 PM EST by Cody Willard

    The Big 3: Since It's Easy Money Anyway, Let's Lever Up the Bailout!

    1. Let’s Lever Up the Bailout!
    2. Let’s Buy Big 3 Call Options
    3. Let’s Treasury Short S&P Puts

    1. We should take the $700 billion for TARP and just lever it up 30 to 1like the guys who used to be in charge of risk control at the brokerage firms like Lehman and Bear used to do. That’d only cost $300 trillion.  And if we are gonna make all this return on our $700 billion investment, just imagine the return on $300 trillion! Hey, those Lehman and Bear guys are running the TARP package anyway, so I’m shocked they’ve not come up with this idea.
    2.  We should take the latest $25 billion in welfare that the Big 3 automakers are begging us for and start buying calls and options on their debt.    We can then send the Big 3 $50 in capital infusions with no penalties to shareholders and turn that $25 billion in call options into a few trillion over night.
    3. Ah, even better!  Let’s have the Treasury start shorting long-term S&P 500 puts.  Warren Buffett has been doing that with Berkshire’s capital, so why wouldn’t we? Stocks always go up in the long run supposedly anyway.  The Treasury could then figuratively print money as they’re literally printing money.

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aaron

Buy credit default swaps on Big 3 debt. Don't bail them out. Bail out the company that sold us the CDSs without enough capital to back them up. Collect on the CDSs. Use that money to then bail out the auto makers. It's turned into a zero-sum game, money in, money out, but no one is getting ahead. Personally I've been shorting S&P options on both sides. With the VIX at 70 the premiums are huge. Although it has been a chore trying to stay out of the money.

November 19, 2008 at 4:54 pm

BOND

This is not the America I grew up to know! What's wrong with us? When did we turn into whimps? When did we turn socialists?....ahh the Central Committee will take care of us all.

November 19, 2008 at 4:44 pm

Spiracha

Someone should do an article that the Treasury position on buying, shorting, whatever they WANT to do with that money ? is really corrupting the read on the markets. That is, it corrupts discovery of real value. Is that stock REALLY in demand ? or did Treasury just move 15 million shares on it today ? should be 100% transparency issues resolved with ALL Treasury stock purchases.

November 19, 2008 at 4:35 pm

Spiracha

Off subject Cody BUT - just occurred to me... Paulson at FIRST said - hurry congress, we need this money NOW ! and now ? it's "oh, we're going to sit on it for a bit". I bet he's rackin' up the interest ! this new private wealth management fund supposedly will be charging 30 billion + for servicing fee's. Gee - with that kind of money, you could buy Bear Stearns and tell them all they're now just going to be processing forms. ? ? ? the fee's are percentage based. ! POINT of this post ? what happened to Need money now - please hurry congress to..... oh, we're going to wait a few months here... while Rome burns. what's the plan ? fire sale stock cleanup by Treasury ? Now that Treasury is involved in buying stocks ? good luck markets pretending you're free. you're always one click away from the treasury turning the markets bipolar - Paulson yells "Buy 50 million shares " Dow goes up 192 pts.

November 19, 2008 at 4:33 pm

Spiracha

I did say Citi was next.

November 19, 2008 at 4:26 pm

about this blog

  • Cody Willard is an anchor on the FOX Business Network. Willard is also the principal of an investment management company. He was a long-time featured columnist for the Financial Times and TheStreet.com as well as a regular featured economist and stock picker on CNBC's ''Kudlow & Company."

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