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Toxic Waste for All
Will ordinary citizens be able to invest their hard-earned shekels in Tim Geithner's sweetheart deal to buy up toxic waste legacy assets from distressed banks? Here's a quick followup:
Two of the country's biggest money managers — Newport Beach-based Pacific Investment Management Co., known as Pimco, and New York-based BlackRock Inc. — say they may launch funds that would allow individuals to have a stake in some of the bad assets to be purchased from banks.
....Bill Gross, co-chief investment officer at Pimco, said his firm was looking into the idea of creating mutual funds that would tap into the program. BlackRock is doing the same, said Curtis Arledge, co-head of fixed income at the firm.
The story goes on to suggest that the funds may be closed-end with a minimum buy-in of $25,000. If that's how it turns out, it wouldn't exactly allow Joe Sixpack to get in on this deal. Still, it's a step in the right direction. It'll be interesting to see if Treasury encourages other retail funds get in on this action.
The prospect of personally
being about to buy into the program certainly puts it in a different light. Even with the incentives offered by the government I would be hesitant to invest in these assets, and I bet a lot of institutional investors probably feel the same. Once bitten, twice shy as they say.
PIMCO moved heavily into
PIMCO moved heavily into mortgage debt last year. Setting up vehicles that prop up banks and preserve their investments is a no brainer for them. Pretending they are doing it to help the little guy is just a bonus.
High Net Worth
Is the investment language, in general, for Qualified Investor (excluding instiutionals).
And "very smart" is quite right, this is marketing optics.
closed-end Geithner funds
Generally closed-end funds don't have minimums, because they just trade like stocks, as many shares as you want. The minimum investment is the price of one share. I suppose they could create some kind of non-traded closed-end fund, but I don't see why they should bother.
The closed-end idea makes sense, because these are not liquid or easily priced investments, so it would be hard to construct an open-end fund that could be priced fairly each day, as open-end funds are.
is debt virtual money?
If the government takes on this amount of debt won't that constrain its ability to borrow in the future, and won't that affect the money supply?
Doesn't that debt have to be regarded as virtual money when the Fed decides how much to issue?
Mea culpa
I guess I spoke too quickly yesterday (when I wrote it wasn't practical). If some funds can set this up, then I'm all for it. It could bring in more funds to get more toxic assets off the banks books.
I wonder which assets and how much of them (what percent of their holdings) the banks will offer for sale?