Friday, September 26, 2008

Attention MBS Shoppers!

Gosh, I sure hope the bailout happens, because Warren Buffett says it'll be lots of fun. “I would love to have 700-billion at Treasury rates to be able to buy fixed-income securities now that they're in distress," he said. "There's a lot of money to be made.”

Yes, he actually used the word “love,” and then gushed enviously: "If I could borrow 700 billion on the government's terms and buy these assets I'd be doing it myself. But unfortunately I'm tapped out.”

Aw, Warren, don't feel bad. When I get my new CDOs, I'll be happy to trade them to you for some Berkshire Hathaway stock.

Having fought off the cynical thought that Mr. Buffett is playing Tom Sawyer and you and I will soon be whitewashing a fence somewhere in Omaha, I'm eager to start shopping at MBS-Mart! But that still leaves the pesky issue of how much Mr. Paulson should pay at the checkout counter.

Mr. Buffett weighed in on that one, too: ”I basically like a market, or something very close to a market-related price. And there are ways to determine that and I don't think that Uncle Sam should be in the business of paying somebody a whole lot more than it's worth in the market today.”

But what will happen to market prices when the market notices a 700 billion-pound gorilla lurching around with cash hanging out of its pockets, mumbling something about hold-to-maturity values? Perhaps, with this bailout plan, we have met the market and it is us.


Some not-so-bad news: According to my friends at the witty-yet-eggheady Liscio Report, we can sort of afford this bailout.

Some not-so-good news: I just remembered this post I did for footnoted a couple of months ago about Wall Street valuations.

Image source: Unfocused Content