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• Thursday, August 16, 2007 10:38 PM

  A few questions, Mr. Leonard.

  I also am not doing very well at understanding what is going on. But it seems to me that investing is betting. You can win and you can lose. What's the difference? I thought it was a good article and that the analogy with gambling is valid. Also topical with the NBA ref admitting guilt.

  Is it true that Fed intervention, with its injections of liquidity, allows big investors to get bailed out? I can't figure it out.

  Please define "injections of liquidity" for me. Does it mean that the Fed is buying mortgage-backed securities? If so, doesn't that mean the its intervention has the effect of saving the asses of those who have taken high risks? If your answer is that they can only purchase highly rated mortgage backed securities, doesn't that cause a problem in itself? The problem being that no one can determine the value of mortgage-based securities because the process has been so secretive, mortgages are commingled, and they can't be properly priced; which is the cause of this whole panic driven market? Does the Fed buy pools that are tranched?

  I also don't understand the concept of tranches. Like the question posed by another commenter, why group different risked-evaluated securities if they are sold separately? I don't follow.

  Where does this bail-out money come from? I'm told it is just created. I don't understand a monetary system where we can send 12.8 billion dollars to Iraq in $100 bills (128 tons of pallets) that haven't been accounted for. There was no accounting system, per Bremmer. Isn't there a price to pay down the road?

  I really wonder about the buying (340 point recovery in the last 45 minutes). If I was a buyer, in this market, I would wait until tomorrow to buy because the odds are heavy that the price will be lower. It just seems to me that the Fed knew that the market was going to tank and it started doing its liquidity infusion to prevent the market from collapsing.

  Is there a way to figure out what and when and how these injections were done? I am talking about finding out what securities were bought at what time and what the ratings of the securities were? Is there a method as to how the purchases were made so that no one is favored?

  —Anonymous
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