Wednesday, November 28, 2007

Somebody needs to explain this to me.

posted by The Vidiot @ 8:12 AM Permalink

If I had really screwed up my money situation and I was about to declare bankruptcy, and then someone rushed in to financially bail me out with a high interest loan that I may or may not be able to pay back, how would THAT instill any confidence in anybody else?

OK. So I know it’s a lame analogy, but this article assumes that yesterday's stock market rally was due to the fact that Abu Dhabi Investment Authority threw nearly $8 BILLION at Citigroup Inc. in the form of a loan with 11% interest no less, and that made people confident??
Citi's ability to secure a capital injection raised hope others might be able to do the same.
How does that work exactly? And why do they say that? I personally think it has to do with the fact that Citigroup is too big to fail and that Abu Dhabi knows that and is just propping it up so the whole thing doesn’t come crashing down. It has nothing to do with being able to “secure a capital injection” and everything to do with fear of the sky falling.

It may also have something to do with the fact that at the end of the day, nothing in the US will be owned by the US and Abu Dhabi knows it and wants a piece of the action. Like the Europeans buying up chunks of Manhattan with their strong Euros.

Of course, what do I know about the market. Nothing, that’s what.



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