12.08.2008

Bill Gross on the Death of Capitalism

When Hank Paulson announced his plans to deplete the Treasury to bail out every bad bank that made bad mortgage loans, we wrote September 19, 2008: The Day Capitalism Died. Though it may have sounded like hyperbole to the untrained ear, we assure you that it wasn't.

In his December 2008 Investment Outlook, bond bailout beggar Bill Gross agrees:
My transgenerational stock market outlook is this: stocks are cheap when valued within the context of a financed-based economy once dominated by leverage, cheap financing, and even lower corporate tax rates. That world, however, is in our past not our future. More regulation, lower leverage, higher taxes, and a lack of entrepreneurial testosterone are what we must get used to – that and a government checkbook that allows for healing, but crowds the private sector into an awkward and less productive corner.

Though he is correct about the outlook, Gross is one of the biggest beneficiaries of the serial bailouts. Billionaire Gross's PIMCO portfolios held positions in all kinds of bad financial companies like Fannie Mae and Freddie Mac and AIG that should have gone bankrupt. Gross's portfolio should have been decimated. Instead, the taxpayers made his positions whole.

A fool and his money are not soon parted. A fool and his money are soon partying with your tax dollars.

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