What's $85 billion amongst friends?

Last night after work I met with the contractor and gave him a deposit to start work on the interior wall we are putting up in the new place. This wall has been a pain in the ass. We are renting; the owners asked if they could get a look at what we were doing so they met with the contractor. They then decided they didn't want there to be a single door but wanted double French doors. I had to call them and explain that if they wanted double French doors they should pay the cost of the wall. They said well we don't want this construction you do. EXACTLY! My point was if they had wanted a wall they had ample time to do it themselves but did not want to incur the cost. But now that their tenants were doing it they wanted to get involved. Once I explained it that way and made my case they acquiesced on how we were having it done. I said to the husband we should never have said anything and just done it.

We are almost done with Heroes so we will be ready for Monday's premiere. We also caught the new episode of Fringe.

There were some major cuties at the gym last night. I was going to go swim this morning but with what is going on in the markets I decided it was better to get t the desk earlier than usual.

Let's talk about the markets. The Fed now has an $85 billion SIV. They bought 79.9% of AIG. They did that number so that it does not have to reside on their balance sheet- 80% is the bar, if an entity owns 80% of anther they must include it on their balance sheet. They are charging a rate that I am sure is illegal in some states- 3 month LIBOR plus 850 basis points. We are now becoming what Great Britain was after WWII- a closet socialist nation- until Thatcher came along and changed it all. Where is the $85 billion coming from? Simple- out of your paycheck. The Treasury will just print more money- that is inflationary thus reducing your purchasing power which is the same as a tax increase. A friend JW argued it was deflationary as long as foreigners kept buying our bonds. Well the latest TIC data ( a measurement of foreign buying of our bonds) shows a marked decline in the willingness of foreigners to buy any more of our bonds. He argued well they are buying Treasuries and selling agencies. I had to kindly point out to him that since the government took over both FNM and FRE there is no difference between the two anymore. We will have to just turn on the printing press. What the Fed did will be felt in our economy for generations. They just took the idea of moral hazard to a whole new level.

The much more frightening issue and the one that will effect most people and isn't really getting focused on enough is the Reserve Fund breaking the buck. The Reserve Fund is a money market fund- a lot like a checking account but not insured by the FDIC. The $1 NAV has been sacrosanct. If it breaks the buck (i.e. the $1 NAV) that is bad. It did last night. The irony is the guys who run the Reserve Fund are the ones who invented the whole concept of a money market fund. They are traditionally very conservative with what they buy for the fund. They did not get into the whole collateralized issues. They gt hit the old fashioned way- they owned debt and notes of LEH.

BCS was very savvy in how they got the LEH assets they wanted. I applaud them. They bought them out of bankruptcy. A brilliant move. Now their US investment banking ops are the only truly clean ones around- all the crap that took LEH down they did not buy and is still in chapter 11.

I did get to see Full Lower Lip on the bus this morning. He is still seriously hot- I think he smiled at me too.

Mr. Barrett got me involved in Mini Adventures on facebook. It is a total geek thing but fun. Basically a really simplified, fully automated D&D game.

I have back to school night tomorrow for my youngest. That is always fun but I have been thru it many times already so it will be quick and painless at least.

Our kids got tickets last week for not being licensed in Hoboken. So we had to get their rabies updated and then we will get them licensed. The younger one got her rabies shot Monday and is definitely feeling it. She was not her usual happy go lucky self last night or this morning.