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An Annualized Return of 23%
Topic Started: Jul 22 2009, 05:29 PM (200 Views)
QuirtEvans
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I Owe It All To John D'Oh
http://www.washingtonpost.com/wp-dyn/content/article/2009/07/22/AR2009072202980.html?hpid=topnews
It would be unwise to underestimate what large groups of ill-informed people acting together can achieve. -- John D'Oh, January 14, 2010.
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Steve Miller
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Bull-Carp
I can haz my retirement back?
Wag more
Bark less
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jon-nyc
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Cheers
Interesting stuff. I'm curious how the JPM warrants will be priced.
In my defense, I was left unsupervised.
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Mikhailoh
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If you want trouble, find yourself a redhead
Very interesting. I have to confess I am not exactly sure how all this works. The article says Goldman paid back 10 billion last month, so are the warrants over and above that, something separate? Exactly how much did the institutions receive and how much must they pay back?
Once in his life, every man is entitled to fall madly in love with a gorgeous redhead - Lucille Ball
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QuirtEvans
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I Owe It All To John D'Oh
As I understand it, the warrants are over and above what was paid back last month. The warrants were the government's kicker ... in effect, if the banks turned very profitable, the warrants were the way the government would earn extra profit, given that the government was taking risk on the downside of bankruptcy.

Warrants are a common way to compensate an investor who is buying into a risky situation. I'm doing a deal right now where each share purchased is accompanied by one warrant. The value of the warrants depends on a lot of things ... the exercise price relative to the current price of the stock, how long the warrants survive, etc. But, when tied to the purchase of shares of common stock, warrants are typically thought of as a "kicker" ... a sweetener for the investor if the stock does very well.
It would be unwise to underestimate what large groups of ill-informed people acting together can achieve. -- John D'Oh, January 14, 2010.
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Mikhailoh
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If you want trouble, find yourself a redhead
OK.. so it is a version of a call added as incentive for, in this case, the taxpayer. Thanks, Quirt.
Once in his life, every man is entitled to fall madly in love with a gorgeous redhead - Lucille Ball
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Jeff
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Good for Goldman for paying. Seems the TARP was good for the Treasury, and good for the country.

Not hardly a "bailout" a la the UAW-GM, now was it?
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Jeff
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Mikhailoh
Jul 23 2009, 03:55 AM
OK.. so it is a version of a call added as incentive for, in this case, the taxpayer. Thanks, Quirt.
Yes, a long-term stock call option is a good analogy, as an additional financial benefit to the taxpayer, above and beyond the interest rate on the original loan.
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QuirtEvans
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I Owe It All To John D'Oh
Jeff
Jul 23 2009, 10:06 AM
Seems the TARP was good for the Treasury, and good for the country.

Well, let's be fair, Jeffrey. This was probably the best-case scenario. I doubt that every single TARP recipient is going to perform quite as well. Some of the So let's do a blended average of the annualized returns on all the TARP funds before we make statements like that.
It would be unwise to underestimate what large groups of ill-informed people acting together can achieve. -- John D'Oh, January 14, 2010.
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