Thursday, September 25, 2008

make money on the Freddie and Fanny Deal

From the WSJ: 

You can slice the numbers a lot of different ways. My calculations, which assume 50% impairment on subprime loans, suggest it is possible, all in, for this portfolio to generate between $1 trillion and $2.2 trillion -- the greatest trade ever. Every hedge-fund manager will be jealous. Mr. Buffett is buying a small piece of the trade via his Goldman Sachs investment.

Over 10 years this could change the budget scenario in D.C., which can also strengthen the dollar. The next president gets a heck of a windfall. In the spirit of Secretary of State William Seward's purchase of Alaska for $7 million in 1867, this week may be remembered as Paulson's Folly.


I hope so.  I have been trying to think of the percentage of bad loans in the mix.  If half the people defaulted, thier homes still have some value.  I think the junk is underpriced cmparwed to it's ultimate value. 

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