Fund gathering, job security, and indexing has resulted in most funds, index and non-index, owning the same stocks. Overowned stocks have huge market capitalization. It requires larger and larger purchases of stock to move prices up. In essence, $100 million in new money will increase the value of a $1 billion stock by 10 percent; a $100 billion stock will only increase in value by 0.1 percent.

But a high-risk investor can actually do a fairly good job of approximating total tax avoidance. If she invests in a basket of fairly high risk, poorly correlated securities, in an average year she will have some gains and some losses, but more probably a net gain. (Common stocks have averaged about 11 percent annual appreciation over the past 70 years.) She can sell all of her losers to establish tax losses and sell winners that generate an equal amount of gains. The tax-free proceeds of these sales can pay her living expenses, and any balance can be reinvested in new stocks. Until she runs out of losses, she will pay no tax. In effect, she can use risk—here viewed as a dispersion of returns—to create a tax shield, whereas we have shown why an investor who opts for a risk-free return has no such shield.

With a tax structure that favors value-creating high-risk investing and rather heavily penalizes more conservative investment patterns, it is no surprise that the United States leads the world in business innovation. The good news is that we seem, for the moment, to be better than the other guy. However, viewed through the lens of total value, the U.S. tax system is a large encumbrance when compared to an ideal system designed to maximize value creation. This is the bad news. But it is also good news, in a sense: There is room for improvement. As we get smarter, we’ll get better.

In addition to financial assistance, the SBA also offers tools to manage a business from start to finish and has made improvements to its own business processes. Following the hurricanes of 2005 (Katrina, Rita and Wilma), the SBA experienced an overwhelming number of loan applications from disaster victims. Lacking the capacity to process all of the loans, the SBA established the framework for a recovery plan to deal with future disasters.

Still, there is ample information available to investors to monitor their individual transactions. Most dealers publish surveillance reports. Moody’s publishes a series of monthly reports (see the appendix to this chapter) that detail CDO performance, broken down by vintage and collateral type. These reports are the closest publication we have to a market performance matrix. Moody’s even details CDO equity returns. The reports are extremely beneficial when examining macrotrends in the CDO market but, because names are not listed, the reports cannot be used to determine the performance of specific deals.

The Democratic chairman of the Senate Banking Committee, Chris Dodd, said on Thursday after two talks: “We are very confident that we can act expeditiously.”

Republican Senator Bob Bennett said: “I expect now that we in fact have a plan, which the House of Representatives and the Senate passed and signed by the president.” Details of the agreement were not initially known.

“Economy in danger”

On Wednesday evening, Bush was in a dramatic televised address on prime time demanded quick decisions. “Our whole economy is in danger,” warned the president. “Without immediate action of Congress could America in a financial panic slip, and an unfortunate scenario could unfold.” Alongside the Democrats Obama and McCain, the Republican Bush also asked leading members of Congress, attended the meeting at the White House to participate. He even called Obama personally to invite him, as his spokeswoman announced.

Even before the agreement has the hope to rescue the U.S. stock markets on Thursday brings profits. The Dow Jones index of defaults rose to the afternoon by 2.2 percent to 11,065 points. In Frankfurt, the Dax with a gain of two percent to 6,173 meters from the trade.