Joe Sixpack surpasses Warren Buffett as the Richest Person in the World!

With the recent $125B investment into the nation’s top nine banks by the Treasury, the American taxpayer stands to make a nice profit over the next five years. The preferred share investments carry a 5% dividend for the first five years and 9% after that. Not quite the 10% that Warren Buffett is getting from GE and GS, but good enough if you consider Buffett invested only $8B and we dropped $125B.

 

Here is the problem about high yields and preferred share dividends; if the companies fail outright or fail to produce profits then there will be no dividend payout. You say that they Govt feels that these banks are too big to fail, so that is not an option. If that is the case then the Govt will have to inject more cash, thus paying itself. (ex. 1+(-1)=0) The end result is we lose.

 

Here is the other fun thing about preferred share investments with dividends; we will never see any “ROI” from it because of the perennial black hole that is the U.S. budget deficit which now stands at about $483B.(This should not to be confused with the National Debt which is over $10 trillion.) Do not lose heart; this financial engineering is needed to smooth the global fear that has spread around the world. If it can serve as any consolation, the European governments have committed to investing $2.3 trillion into their companies and I expect Asia to follow with at least $1T. This should hold us until November 4th.

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