I am not sure what to think about the fact that a money manager and I have been having the same feeling of "watching a train wreck in slow motion" as the current credit cycle unwinds.
Although I can safely say that he is more bearish than I am, I do agree with the overall sentiment that things will worsen significantly before we are out of this thunderstorm:
Jeremy Grantham: We're Watching A Slow-Motion Train Wreck
But in the mean time, thankfully the creative side of our economy continues to elicit, if not lightning bolts, at least enough camera flashes to distract one from the clouds.
Although the GUI leaves something to be desired, this collection of start-ups confirms that ingenuity and creativity are booming:
KillerStartups.com
The website attempts to use the "digg/filter" model to allow users to sort through the various new startups popping up out there.
I hope the name isn't too ironic or foreboding of another turn of events in the web 2.0 space...I think the credit markets will be dark enough without another bubble bursting alongside it.
Tuesday, July 31, 2007
Monday, July 30, 2007
Like Dominoes
This article updates the spread of contagion to blue chip fund Sowood Capital Management LP. According to Bloomberg, the NY Times article I referenced below mentioning a drop of 10% is vastly understated, and instead the firm's "two hedge funds plunged more than 50 percent amid the rout in credit markets."
Citadel Takes Over Most Sowood Assets After 50% Loss
As the article also mentions, this fund suffered losses not in subprime loans, but in "corporate bonds and loans". This surely is contagion in its clearest form.
Interestingly, as I discussed in the last post, Citadel, another hedge fund, still has adequate resources to step in and save off total implosion by buying some of the assets. In other words, at least in this case, the system is digesting the distress (albeit at a highly discounted level).
Unfortunately, I don't think this will be the last headline like this, especially given the fact that those at the helm of this fund were former Harvard Endowment managers - aka theoretically some of the best in the business.
Citadel Takes Over Most Sowood Assets After 50% Loss
As the article also mentions, this fund suffered losses not in subprime loans, but in "corporate bonds and loans". This surely is contagion in its clearest form.
Interestingly, as I discussed in the last post, Citadel, another hedge fund, still has adequate resources to step in and save off total implosion by buying some of the assets. In other words, at least in this case, the system is digesting the distress (albeit at a highly discounted level).
Unfortunately, I don't think this will be the last headline like this, especially given the fact that those at the helm of this fund were former Harvard Endowment managers - aka theoretically some of the best in the business.
CCRM = Be Careful
The below article discusses a recent report by the Fed which focuses on Counterparty Credit Risk Management (CCRM) as a crucial component to reducing the risk of a system wide implosion
Fed Report: Risk Management Best Defense Against HF-Caused Market Failure
In English, this means that you should be careful who you are dealing with, especially when lending them billions of dollars.
Seeing how difficulties in underwriting the credit risk on something as simple as a home mortgage can have massive impacts when magnified to a large scale (aka the recent implosion in CDO's and other mortgage back securities) leads me to wonder how inadequate CCRM - or not being careful enough with your hedge fund counterparties - will impact the balance sheets of prime brokers as the credit cycle plays out.
The NY Times today mentioned that woes are even spreading to blue-chip funds: $3 Billion Hedge Fund Is Down 10% for Year.
This further highlights how challenging it is to adequately implement CCRM in a dynamically changing environment while you are at the same time competing for business.
Finally, it looks as though funds may be feeling the back-lash from this reality setting in as Prime Brokers have started implementing stiffer terms for certain hedge funds: Hedge Funds Feeling the Heat
As with the regulation of subprime lending, closing the spigot too fast could cause greater volatility as the system looks to digest an increasing level of distress...Or maybe this is just enough CCRM to keep things from spiraling out of control.
Fed Report: Risk Management Best Defense Against HF-Caused Market Failure
In English, this means that you should be careful who you are dealing with, especially when lending them billions of dollars.
Seeing how difficulties in underwriting the credit risk on something as simple as a home mortgage can have massive impacts when magnified to a large scale (aka the recent implosion in CDO's and other mortgage back securities) leads me to wonder how inadequate CCRM - or not being careful enough with your hedge fund counterparties - will impact the balance sheets of prime brokers as the credit cycle plays out.
The NY Times today mentioned that woes are even spreading to blue-chip funds: $3 Billion Hedge Fund Is Down 10% for Year.
This further highlights how challenging it is to adequately implement CCRM in a dynamically changing environment while you are at the same time competing for business.
Finally, it looks as though funds may be feeling the back-lash from this reality setting in as Prime Brokers have started implementing stiffer terms for certain hedge funds: Hedge Funds Feeling the Heat
As with the regulation of subprime lending, closing the spigot too fast could cause greater volatility as the system looks to digest an increasing level of distress...Or maybe this is just enough CCRM to keep things from spiraling out of control.
Friday, July 27, 2007
Naive Optimism
One of the things most unsettling about the current situation in the credit markets is that it makes me question the integrity of the financing system behind the boom in the mortgage securitization market and the financing markets in general.
While this headline may be motivated by an investor's misplaced frustrations, when I see the rapid pace at which the system has unraveled over the last few months, I am inclined to believe that this will be the first of many such accusations:
Wall Street often shelved damaging subprime reports
In defense of the big banks (and not just because I used to work at one and I have friends at many), there is some validity to the concept that each issuance includes the words "past performance is not necessarily an indication of future results" for a reason. It is difficult to know when and how events will change, and people's predictive abilities are massively hindsight biased.
For the same reason that people are more likely to laugh at a joke when the CEO laughs first, individual buyers and sellers in a market are unlikely to depart from historical valuation methods unless someone else moves first. This causes people to move late and then in a herd mentality.
As an underwriter, it is likely impossible to predict the timing of such movements, and if "valuation" is defined by the market's willingness to pay for something, then in a very real sense, until that herd moves you are justified and in fact almost mandated to price things based on historical performance.
In this case, I have no doubt that the rating agencies, as helped by the banks, modeled hundreds if not thousands of scenarios in each securitization transaction. Through these "Monte Carlo" simulations, they felt justified in thinking that the past performance and correlations were sufficiently predictive of future pricing to "rate" the securities accordingly.
As an investor in such a transaction, the onus would then be upon you to question the underwriting techniques - to anticipate future changes...and to perhaps even use a bit of creative thinking to try to predict when the market and herd would move.
Unfortunately, during the financing boom over the last five years, both buyers and sellers lost sight of the reality of a deteriorating credit (the american homeowner) underlying the system.
Now that we are watching the cards fall down and reflecting on some of the bad investments in the rear view mirror, it is only natural to point fingers, and to doubt.
But as I reflect - my naivete wins out - and instead of litigation I reach for learning so that we can perhaps minimize the contagion in this cycle and learn to prevent it next time around.
While this headline may be motivated by an investor's misplaced frustrations, when I see the rapid pace at which the system has unraveled over the last few months, I am inclined to believe that this will be the first of many such accusations:
Wall Street often shelved damaging subprime reports
In defense of the big banks (and not just because I used to work at one and I have friends at many), there is some validity to the concept that each issuance includes the words "past performance is not necessarily an indication of future results" for a reason. It is difficult to know when and how events will change, and people's predictive abilities are massively hindsight biased.
For the same reason that people are more likely to laugh at a joke when the CEO laughs first, individual buyers and sellers in a market are unlikely to depart from historical valuation methods unless someone else moves first. This causes people to move late and then in a herd mentality.
As an underwriter, it is likely impossible to predict the timing of such movements, and if "valuation" is defined by the market's willingness to pay for something, then in a very real sense, until that herd moves you are justified and in fact almost mandated to price things based on historical performance.
In this case, I have no doubt that the rating agencies, as helped by the banks, modeled hundreds if not thousands of scenarios in each securitization transaction. Through these "Monte Carlo" simulations, they felt justified in thinking that the past performance and correlations were sufficiently predictive of future pricing to "rate" the securities accordingly.
As an investor in such a transaction, the onus would then be upon you to question the underwriting techniques - to anticipate future changes...and to perhaps even use a bit of creative thinking to try to predict when the market and herd would move.
Unfortunately, during the financing boom over the last five years, both buyers and sellers lost sight of the reality of a deteriorating credit (the american homeowner) underlying the system.
Now that we are watching the cards fall down and reflecting on some of the bad investments in the rear view mirror, it is only natural to point fingers, and to doubt.
But as I reflect - my naivete wins out - and instead of litigation I reach for learning so that we can perhaps minimize the contagion in this cycle and learn to prevent it next time around.
Thursday, July 26, 2007
Housing's House of Cards
This article provides a good assessment of the current situation with a focus on the dynamics underlying the house of cards - the housing market. The author focuses on the brutal reality that we are in for a long cycle of downward pressure on housing prices and this will have broad implications for the rest of the economy.
Housing Minsky Moment: 3 Factors. Prime Contagion, Record Foreclosures, and Publicity.
The piece I think he fails to address is that the entire system is driven by the credit securitization market and that the key to predicting the future trajectory/recovery of the markets will be determining how much the system can digest the elimination of leverage as mortgages underlying CDO's continue to default. To the extent the diversification story is real, and default risk was somehow priced in at a somewhat realistic (although obviously underpriced) level, perhaps this cycle will be shorter than those in the past as resecuritization and out-of-court restructurings by alternative asset managers (aka hedge funds) lead the way.
Although it is scary to see headlines like this:
Financial crisis just one 'Bear-like' event away: Economist and articles like this: Subprime coming home to roost?, the reality is that there are a bunch of very smart, very driven investors out there who will do everything they can to find a way to extract value out of the system.
One challenge that the housing market in particular will face, is that as individual homeowners feel the pain of the unwinding that has already begun at the ground level of the economy, they will complain to regulators, who will in turn look to point fingers. Lawsuits have already been filed, likely for good reason, by the NAACP and others against subprime lenders, and as mentioned here in another post, CFC and others have stopped selling 2/28 ARMs.
While regulatory oversight is likely needed to some degree and likely could have prevented the excesses of this cycle, as the market looks to correct closing the faucet on exotic securities en masse would be devastating. Hopefully, this will not be the result, and if regulators react as slowly as usual, perhaps it can be avoided.
The short answer is: nobody knows what tomorrow brings. So I will stay as Bullish as I can...and acknowledge my Paranoia.
Housing Minsky Moment: 3 Factors. Prime Contagion, Record Foreclosures, and Publicity.
The piece I think he fails to address is that the entire system is driven by the credit securitization market and that the key to predicting the future trajectory/recovery of the markets will be determining how much the system can digest the elimination of leverage as mortgages underlying CDO's continue to default. To the extent the diversification story is real, and default risk was somehow priced in at a somewhat realistic (although obviously underpriced) level, perhaps this cycle will be shorter than those in the past as resecuritization and out-of-court restructurings by alternative asset managers (aka hedge funds) lead the way.
Although it is scary to see headlines like this:
Financial crisis just one 'Bear-like' event away: Economist and articles like this: Subprime coming home to roost?, the reality is that there are a bunch of very smart, very driven investors out there who will do everything they can to find a way to extract value out of the system.
One challenge that the housing market in particular will face, is that as individual homeowners feel the pain of the unwinding that has already begun at the ground level of the economy, they will complain to regulators, who will in turn look to point fingers. Lawsuits have already been filed, likely for good reason, by the NAACP and others against subprime lenders, and as mentioned here in another post, CFC and others have stopped selling 2/28 ARMs.
While regulatory oversight is likely needed to some degree and likely could have prevented the excesses of this cycle, as the market looks to correct closing the faucet on exotic securities en masse would be devastating. Hopefully, this will not be the result, and if regulators react as slowly as usual, perhaps it can be avoided.
The short answer is: nobody knows what tomorrow brings. So I will stay as Bullish as I can...and acknowledge my Paranoia.
Repricing Scorecard
Bernanke says not to worry, that this is nothing but a repricing of risk... Paulson Says Subprime Rout Doesn't Threaten Economy
But this repricing is having some tangible effects in the financing markets. Not to mention that the rest of the economy can not help but notice that people are not buying new homes.
The Wall Street Journal did us a favor and collected a list of the major hiccups in the credit markets that have emerged over the last six weeks. Note the increasing pace...
SCORECARD: DEBT DILEMMAS
Looking at this scorecard and the rest of the markets over the last few days makes me wonder whether Mr. Paulson and others are simply expressing wishful thinking. I hope he has more/better information than we do.
But this repricing is having some tangible effects in the financing markets. Not to mention that the rest of the economy can not help but notice that people are not buying new homes.
The Wall Street Journal did us a favor and collected a list of the major hiccups in the credit markets that have emerged over the last six weeks. Note the increasing pace...
SCORECARD: DEBT DILEMMAS
Looking at this scorecard and the rest of the markets over the last few days makes me wonder whether Mr. Paulson and others are simply expressing wishful thinking. I hope he has more/better information than we do.
Today Is Visual
While I am not one for believing scary headlines in general, today's reaction in the equity markets to the news discussed here yesterday in the credit markets may be the beginning of an ugly period for long-only investors across asset classes. If Bank of Japan or the Fed raises rates, this could be the nail in the coffin.For now, I wish I was an options trader because there will be volatility all around as people try to sort out heads from tails and emotion from reality.
If you believe this article: Grim reapurr: The cat that can predict death then you should dive right in and start buying.
But today's markets make me think that think that Taleb will be laughing as he looks in the rearview at this round of people who were
Fooled by Randomness
What Is Wrong With This Picture?
The picture may not do the point service, but on Friday, the headline read "A Low-Risk Investment in a High-Risk Lender" and today the stock is down more than 10% as the reality of lending to high risk individuals started to hit home for this pay-day lender.
This "reality" is starting to sink in across the markets, and although this validates some of the hypotheses discussed here, it makes me even more concerned for the short term future of the economy.
I remain optimistic that the creative spirit embodied in the growing number of internet based start-ups and tools will help the U.S. continue to lead the world in innovation (well, besides the Wii and all of these dope international Web 2.0 start-ups). Although the days where people are able to write such blatantly contradictory stories such as the one posted above are coming to an end. Perhaps this is a good thing, but sometimes reality bites.
Wednesday, July 25, 2007
Big Busted Bridges
For some reason these headlines make me think that we will see more pain in the banking sector as more mammoth buyout deals come to market (discussed here):
Banks Postpone Chrysler Funding Plan & KKR's Banks Fail to Sell $10 Billion of Boots Loans
But maybe I am just too pessimistic and instead Moody's is right to keep an optimistic take on all of this: US housing difficulties cause for concern but no systemic threat: Moody's
According to Moody's "The shock-absorption capacity of the 'core' of the financial system is very high."
They point straight at the same banks who are now stuck with these massive bridge loans on their balance sheets for proof of that observation.
Shock absorbers are cool.
Banks Postpone Chrysler Funding Plan & KKR's Banks Fail to Sell $10 Billion of Boots Loans
But maybe I am just too pessimistic and instead Moody's is right to keep an optimistic take on all of this: US housing difficulties cause for concern but no systemic threat: Moody's
According to Moody's "The shock-absorption capacity of the 'core' of the financial system is very high."
They point straight at the same banks who are now stuck with these massive bridge loans on their balance sheets for proof of that observation.
Shock absorbers are cool.
Bond King vs. Fed
This is truly one of the most brilliant things I have read in awhile...and not just because I agree with most of it. If you doubt my pessimism expressed over the last 8 months or so, maybe hearing it echoed by the greatest bond investor in the world will give it more legs.
Read this...and be nervous about the next few months in the credit markets...and realize that when Gross agrees with Buffett on issues regarding the rich, they are probably right.
Investment Outlook - August 2007 "Enough is Enough"
Maybe somebody should give the memo to the Fed:
Poole Says Inflation Slowing `a Bit,' Subprime Damage Contained
Hmm... Who would you put your money with on this one: one of the greatest bond investors of all time responsible for managing upwards of $500b of assets, or a beaurocrat who is trying to stave off panic with the same (but now watered down) "containment" language?
Maybe the Fed got a sneak peak at Gross's letter and wanted to stave off reaction at the pass. The chief took a shot at his tax commentary here: Fed chief stumbles into U.S. income inequality debate
It could just be coincidence I guess.
Read this...and be nervous about the next few months in the credit markets...and realize that when Gross agrees with Buffett on issues regarding the rich, they are probably right.
Investment Outlook - August 2007 "Enough is Enough"
Maybe somebody should give the memo to the Fed:
Poole Says Inflation Slowing `a Bit,' Subprime Damage Contained
Hmm... Who would you put your money with on this one: one of the greatest bond investors of all time responsible for managing upwards of $500b of assets, or a beaurocrat who is trying to stave off panic with the same (but now watered down) "containment" language?
Maybe the Fed got a sneak peak at Gross's letter and wanted to stave off reaction at the pass. The chief took a shot at his tax commentary here: Fed chief stumbles into U.S. income inequality debate
It could just be coincidence I guess.
The Princess is In Another Castle
Nintendo continues to destroy everyone. Sony and MSFT should have known better than to take on the creators of Super Tecmo Bowl, Zelda and Mario Brothers. I mean seriously did they think they could compete? That would be like someone challenging MJ to a game of one on one. Even Lebron would have to bow.
Nintendo's Profit Rises to Record on Wii, DS Sales
I can't wait until their new toys come out...in the mean time I will just use it to play the games and watch Google video on my livingroom screen.
Nintendo's Profit Rises to Record on Wii, DS Sales
I can't wait until their new toys come out...in the mean time I will just use it to play the games and watch Google video on my livingroom screen.
Tuesday, July 24, 2007
So Much For Optimism
This is the second morning I have awaken to a nice pop in the equity markets. Yesterday was long NVT - today was short CFC.
Countrywide - the largest subprime mortgage lender in the nation - has to date been able to avoid the implosion faced by many of its smaller rivals, primarily by focusing on the story of its diversification away from subprime lending. Today's announcement shows that this has not prevented the challenges in the credit markets from hurting its results: CFC Reports a Little Problem and here is a jaw-dropper on their current foreclosures: Countrywide Foreclosures Blog
I also found another good article explaining some of the challenges in the credit derivatives markets. This one discusses the difference between basic CDOs (which are real estate-backed) and CLOs (which are corporate-backed). The article states that spreads have widened 4 percent for certain tranches in the last few months.
KKR, Homeowners Face Funding Drain as CDO Sales Slow
The bottom line is that reality is setting in as risk is repriced throughout the credit markets and the ramifications are huge.
Just as homeowners across the country are running into trouble as the interest rate ARM's kick to floating at the same time the housing market is falling, so too a corporate borrower (especially a highly leveraged one) may become squeezed as inflation drives up costs, even in China , and borrowing gets more expensive.
Countrywide - the largest subprime mortgage lender in the nation - has to date been able to avoid the implosion faced by many of its smaller rivals, primarily by focusing on the story of its diversification away from subprime lending. Today's announcement shows that this has not prevented the challenges in the credit markets from hurting its results: CFC Reports a Little Problem and here is a jaw-dropper on their current foreclosures: Countrywide Foreclosures Blog
I also found another good article explaining some of the challenges in the credit derivatives markets. This one discusses the difference between basic CDOs (which are real estate-backed) and CLOs (which are corporate-backed). The article states that spreads have widened 4 percent for certain tranches in the last few months.
KKR, Homeowners Face Funding Drain as CDO Sales Slow
The bottom line is that reality is setting in as risk is repriced throughout the credit markets and the ramifications are huge.
Just as homeowners across the country are running into trouble as the interest rate ARM's kick to floating at the same time the housing market is falling, so too a corporate borrower (especially a highly leveraged one) may become squeezed as inflation drives up costs, even in China , and borrowing gets more expensive.
Monday, July 23, 2007
Who is the Evil Empire?
As the I-Phone drives users back to AT&T, as discussed below, Google has also emerged as a possible player in the mobile space.
It appears that they are taking their approach straight to congress and taking on Mobile-MaBell head on in the process.
Not surprisingly, as discussed here (in a good piece), the tech crew is rooting for Google: The FCC Needs to Listen to Google
But I wonder if they continue to grow at this pace if anti-MSFT will be ditched for anti-GOOG.
It appears that they are taking their approach straight to congress and taking on Mobile-MaBell head on in the process.
Not surprisingly, as discussed here (in a good piece), the tech crew is rooting for Google: The FCC Needs to Listen to Google
But I wonder if they continue to grow at this pace if anti-MSFT will be ditched for anti-GOOG.
A Nice Primer on Pessimism
This opinion piece on Bloomberg gives a nice overview of the situation in the credit markets and the various moving pieces I have been discussing with many of you over the last six months:
AAA Grades on Subprime CDOs May Give Cold Comfort: Mark Gilbert
It is hard to be gloomy when NVT pops like it did this morning
Happy Monday.
AAA Grades on Subprime CDOs May Give Cold Comfort: Mark Gilbert
It is hard to be gloomy when NVT pops like it did this morning
Happy Monday.
Friday, July 20, 2007
Convergence is Cool
So Google is now openly competing for wireless spectrum, adding cred to the rumor I helped spread a couple of weeks ago: Google open to wireless bid
I for one am glad to see new-tech co's building new empires, as Facebook is clearly accomplishing as Ebay announded an app today: eBay Launches Facebook App
Almost lets me forget about the fact that the equity markets are finally starting to wake up: U.S. Stocks Retreat on Earnings, Bad-Loan Concern; Google Drops
I wonder if the stock market is to innovation as politics are to alternative investing...I was never good at those analogies.
I for one am glad to see new-tech co's building new empires, as Facebook is clearly accomplishing as Ebay announded an app today: eBay Launches Facebook App
Almost lets me forget about the fact that the equity markets are finally starting to wake up: U.S. Stocks Retreat on Earnings, Bad-Loan Concern; Google Drops
I wonder if the stock market is to innovation as politics are to alternative investing...I was never good at those analogies.
TGIA
Last night I saw a performance by the LA Philharmonic and it made me realize that the oil doomsdayers are wrong. I refuse to believe the spew of The Long Emergency, regardless of its allure.
As I told my friend last night: the fact that human ingenuity can create music that lasts for hundreds of years gives me hope that we can tackle whatever challenges we face. Plus a recent report makes it sound like things are challenging, but not dire: Oil report's conclusion: Broad effort needed to satiate energy demand
On that optimistic note, I wanted to point out an aggressive push that is happening over at Facebook which has recently been bombarded with new users and applications. Yesterday it announced the acquisition of Parakey in a push to fully integrate with the desktop and web browser. I think this move might backfire and turn the company into a MySpace/Microsoft amalgamation, but maybe the technology is good enough to pull it off. This article discusses the implications: Could Facebook Become the Next Microsoft?
The power of the Facebook, Pownce, Twitter, etc. crowd is the ability it gives us to connect with each and share content other instantaneously --> which should lead to better government and perhaps the prevention of massive private takings in the future.
In the mean time, the middle class in this country is feeling the reality of the headline subprime implosion and garbage is being spewed the local press about how their problems are becoming the convention.
So, on this Friday, take a moment to read this call to arms from a recent graduation speech.
I am optimistic that we will answer it, whether through a platform like Facebook, or some future innovation, to come together to make a change for the better.
As I told my friend last night: the fact that human ingenuity can create music that lasts for hundreds of years gives me hope that we can tackle whatever challenges we face. Plus a recent report makes it sound like things are challenging, but not dire: Oil report's conclusion: Broad effort needed to satiate energy demand
On that optimistic note, I wanted to point out an aggressive push that is happening over at Facebook which has recently been bombarded with new users and applications. Yesterday it announced the acquisition of Parakey in a push to fully integrate with the desktop and web browser. I think this move might backfire and turn the company into a MySpace/Microsoft amalgamation, but maybe the technology is good enough to pull it off. This article discusses the implications: Could Facebook Become the Next Microsoft?
The power of the Facebook, Pownce, Twitter, etc. crowd is the ability it gives us to connect with each and share content other instantaneously --> which should lead to better government and perhaps the prevention of massive private takings in the future.
In the mean time, the middle class in this country is feeling the reality of the headline subprime implosion and garbage is being spewed the local press about how their problems are becoming the convention.
So, on this Friday, take a moment to read this call to arms from a recent graduation speech.
I am optimistic that we will answer it, whether through a platform like Facebook, or some future innovation, to come together to make a change for the better.
Thursday, July 19, 2007
Dark Clouds Grow Darker
As the headlines yesterday echoed, even the Fed has started to backtrack from its previous "well contained" dialogue to acknowledge that the credit crunch in the mortgage market is spreading. The Fed chief says subprime losses could hit $100bn, but if history is any judge the estimates they make are likely conservative
The place where the most obvious signs of the spreading is taking place, as noted here yesterday, is in the next step up on credit quality from subprime, to Alt-A, which is explained here: The Alt-A Word
That the ripple effects of deteriorating credit are having a large impact was exemplified by the blow up of Bear's large subprime focused hedge funds, and investors who now are facing massive losses are not happy with that result.
As the trajectory of the contagion remains somewhat unclear, signs that the challenges will not only spread to higher quality assets here, but also to investors abroad hit the headlines today:
Australian investors hit by US subprime crisis
"An Australian investment fund is teetering on the brink of a billion-dollar collapse after being exposed to the subprime mortgage crisis in the United States."
This is why I often prefer daydreaming about the future over thinking about the present...
The place where the most obvious signs of the spreading is taking place, as noted here yesterday, is in the next step up on credit quality from subprime, to Alt-A, which is explained here: The Alt-A Word
That the ripple effects of deteriorating credit are having a large impact was exemplified by the blow up of Bear's large subprime focused hedge funds, and investors who now are facing massive losses are not happy with that result.
As the trajectory of the contagion remains somewhat unclear, signs that the challenges will not only spread to higher quality assets here, but also to investors abroad hit the headlines today:
Australian investors hit by US subprime crisis
"An Australian investment fund is teetering on the brink of a billion-dollar collapse after being exposed to the subprime mortgage crisis in the United States."
This is why I often prefer daydreaming about the future over thinking about the present...
Nature is Better Than the Internet (Maybe)
I just had to post these pictures of a Pride even though many of you will see it on Drudge . Photo's like these make me wonder why I spend so much of my time staring at a screen and playing with new toys and websites with bad names.
But then I see what a fellow HBS grad was able to accomplish in less than two years in building a dope channel for distributing digital content at www.cruxy.com and it makes me realize that there is a lot of work yet to be done in making the Internet the powerful tool it can be.
So even if Cruxy fails or www.profilactic.com has a horrible name, the fact that people are creating on the Internet in ways that are new and different makes me think that it is worthwhile to spend time on in trying to achieve something great...though maybe nature is just a bit greater.
But then I see what a fellow HBS grad was able to accomplish in less than two years in building a dope channel for distributing digital content at www.cruxy.com and it makes me realize that there is a lot of work yet to be done in making the Internet the powerful tool it can be.
So even if Cruxy fails or www.profilactic.com has a horrible name, the fact that people are creating on the Internet in ways that are new and different makes me think that it is worthwhile to spend time on in trying to achieve something great...though maybe nature is just a bit greater.
Wednesday, July 18, 2007
Rocky Waters Spur Change
Spending five minutes on this blog or talking to me will give you the clear impression that I am skeptical about the credit markets, and that I think this risk might spread further. The following highlights a similar concern amongst fund managers in a recent survey, though they remain optimistic about the equity markets.
Credit risk poses greatest risk to stability: survey
Signs that the cracks are spreading abound, and as the Bear Stearns funds now appear to be almost worthless, rumors that other funds are beginning to implode is not only not suprising but expected:
Hedge Fund Meltdown Rumors: Chapter Whatever
What the long term effects of this will be remain unclear, but one thing that is certain is that the alternative investment universe who previously had been riding a wave of liquidity to the IPO market is now seeking a more challenging environment:
Bell Canada bondholders to sue company over LBO
As the prospect of a smooth sailing IPO has become more challenging, true to form, Goldman seems to have provided an alternative outlet by creating a "private market" of sorts for them to seek refuge and gain liquidity at the same time:
Apollo set to list shares on ‘private’ new market - Times Online
And who knows...maybe all of this is an overreaction and the true contrarian play is to be long subprime and credit. At least some people think that might be the way to go:
Black Pearl Sails Into Subprime Seas
I for one, remain just a bit skeptical...at least until there is more red on the street.
Credit risk poses greatest risk to stability: survey
Signs that the cracks are spreading abound, and as the Bear Stearns funds now appear to be almost worthless, rumors that other funds are beginning to implode is not only not suprising but expected:
Hedge Fund Meltdown Rumors: Chapter Whatever
What the long term effects of this will be remain unclear, but one thing that is certain is that the alternative investment universe who previously had been riding a wave of liquidity to the IPO market is now seeking a more challenging environment:
Bell Canada bondholders to sue company over LBO
As the prospect of a smooth sailing IPO has become more challenging, true to form, Goldman seems to have provided an alternative outlet by creating a "private market" of sorts for them to seek refuge and gain liquidity at the same time:
Apollo set to list shares on ‘private’ new market - Times Online
And who knows...maybe all of this is an overreaction and the true contrarian play is to be long subprime and credit. At least some people think that might be the way to go:
Black Pearl Sails Into Subprime Seas
I for one, remain just a bit skeptical...at least until there is more red on the street.
Customized Content is King
Sometimes "bad news" is not so bad. The authors of Wired and surely the Pew Research Center for People & the Press probably thought this headline was a sign of the negative impact that the Internet is having on the masses:
Infoporn: Despite the Web, Americans Remain Woefully Ill-Informed
But as I read the article, I realized that it may tell more about the kinds of content that people are choosing to consume. The questions asked by the researchers were predominantly focused on issues related to politics and government.
That people are getting more of their information from the Internet and also now know less about politics does not necessarily imply that they are "ill-informed" but perhaps indicates that people are dissillusioned with government and choosing to spend their time thinking about other things.
This poll indicates such a theory is not far fetched: Voters unhappy with Bush; Congress: Reuters poll
I for one am glad that people are choosing to consume information that they want rather than eating what the media feeds them. Maybe in the future we will have a more widely informed citizenry capable of picking a more representative set of leaders, so that polls could conform to the people rather than the other way around.
Infoporn: Despite the Web, Americans Remain Woefully Ill-Informed
But as I read the article, I realized that it may tell more about the kinds of content that people are choosing to consume. The questions asked by the researchers were predominantly focused on issues related to politics and government.
That people are getting more of their information from the Internet and also now know less about politics does not necessarily imply that they are "ill-informed" but perhaps indicates that people are dissillusioned with government and choosing to spend their time thinking about other things.
This poll indicates such a theory is not far fetched: Voters unhappy with Bush; Congress: Reuters poll
I for one am glad that people are choosing to consume information that they want rather than eating what the media feeds them. Maybe in the future we will have a more widely informed citizenry capable of picking a more representative set of leaders, so that polls could conform to the people rather than the other way around.
Tuesday, July 17, 2007
First Sub, Now Alt-A, Tomorrow?
As the non-spreading containment of the credit markets continues to be isolated to the subprime sector, somehow the Alt-A sector is starting to show visible signs of deterioration.
The fact that Moody's is already reacting speaks more to the magnitude of the likely issues here than to the risk if the mollasses pace of the agencies in the subprime context is any indicator.
Thus this is not a good sign:
Moody's Possible Downgrades of Alt-A Trusts
Maybe they noticed that a big Alt-A lender went straight to Chapter 7 today without a thought of reorganizing.
Alliance Bancorp, sister companies file for bankruptcy liquidation
Don't worry, it is all well contained. Well, some doomsday types disagree:
The Coming Credit Meltdown
Subprime woes spread to loans; stocks next
Who knows what direction this boat is headed, but I for one hope there are life-rafts for more than just the women and children.
The fact that Moody's is already reacting speaks more to the magnitude of the likely issues here than to the risk if the mollasses pace of the agencies in the subprime context is any indicator.
Thus this is not a good sign:
Moody's Possible Downgrades of Alt-A Trusts
Maybe they noticed that a big Alt-A lender went straight to Chapter 7 today without a thought of reorganizing.
Alliance Bancorp, sister companies file for bankruptcy liquidation
Don't worry, it is all well contained. Well, some doomsday types disagree:
The Coming Credit Meltdown
Subprime woes spread to loans; stocks next
Who knows what direction this boat is headed, but I for one hope there are life-rafts for more than just the women and children.
Dashing My Patriotism
Just as I get through a momentary binge of optimism, I am reminded of one of the doomsday speculative scenarios I have speculated with an extensive discussion of the topic on Bloomberg:
Goldman, JPMorgan Saddled With Debt They Can't Sell
I can't help but hear the Juvenile inspired, "I heard you takin' spodie wodie..."
And for some reason, a glance at the Markit ABX charts which KEEP plummeting brings to mind the Ramones...I wanna be sedated.
Thanks to WLH for the downer/reality check.
Goldman, JPMorgan Saddled With Debt They Can't Sell
I can't help but hear the Juvenile inspired, "I heard you takin' spodie wodie..."
And for some reason, a glance at the Markit ABX charts which KEEP plummeting brings to mind the Ramones...I wanna be sedated.
Thanks to WLH for the downer/reality check.
The Next Big Thing
With all of the doomsday-like gloom chat here, you might think I would be like D.E. Shaw and look for future opportunies in Gurgaon or Mumbai.
But although I contemplated moving to Pune last summer, I am glad I stuck to southern cali where I could become more intimate with the developments in new media and the hedge fund industry.
This guy suggests that Facebook trumps them all with its functionality: Why you can't compare Facebook to Twitter Pownce or Jaiku
But regardless of whether you like these new toys, or
hate the I Phone, the innovative spirit of this country will keep us booming long after the credit markets implode, no matter what the hubbert's peakers have to say to the contrary.
So I will keep my eye out and my brain storming here in the USA for the next YouTube (don't forget it was only created 2 years ago from scratch).
But although I contemplated moving to Pune last summer, I am glad I stuck to southern cali where I could become more intimate with the developments in new media and the hedge fund industry.
This guy suggests that Facebook trumps them all with its functionality: Why you can't compare Facebook to Twitter Pownce or Jaiku
But regardless of whether you like these new toys, or
hate the I Phone, the innovative spirit of this country will keep us booming long after the credit markets implode, no matter what the hubbert's peakers have to say to the contrary.
So I will keep my eye out and my brain storming here in the USA for the next YouTube (don't forget it was only created 2 years ago from scratch).
Filtering a New Kind of Filter
The more I think about it, the more I realize the power of Web 2.0 partially resides in the ability it gives us to self-select into groups of like-minded people who can share and collaborate. One of the best functions in this process is the filtering of the massive amount of information that is floating along out there...
This site helps to filter the filters by ranking the top web 2.0 sites: Listio Top 100
As with anything the rank is only as good as the crowd that votes, but this one seems to be driven by those at the front edge of the expansion in social networking, so it might be legit.
The author of this article flirts with these concepts but misses the filter element as he talks about the need to move beyond Web 2.0. Maybe he is right on. Either way, dreaming is better than not.
This site helps to filter the filters by ranking the top web 2.0 sites: Listio Top 100
As with anything the rank is only as good as the crowd that votes, but this one seems to be driven by those at the front edge of the expansion in social networking, so it might be legit.
The author of this article flirts with these concepts but misses the filter element as he talks about the need to move beyond Web 2.0. Maybe he is right on. Either way, dreaming is better than not.
Looming Leverage
This is the first time I have heard anyone in the mainstream media mention the risk of collapse that is inherent in the CDS markets - this market is predicated upon a risk transfer mechanism which implies that there is someone on the other side of the trade willing to write the insurance that you seek. The looming question is: what happens when a few of these overeager underwriters of risk blow up...who is left holding the bag?
Derivatives Banks Concerned by Hedge Fund Leverage
Thanks to the author of the article, Risk, who in my mind did a much better job with this one than the last article I quoted here...though I still can't get over his name.
The uber-doomsdayer crowd would likely think it was all part of a conspiracy related to the Plunge Protection Team but that would be silly ;).
Derivatives Banks Concerned by Hedge Fund Leverage
Thanks to the author of the article, Risk, who in my mind did a much better job with this one than the last article I quoted here...though I still can't get over his name.
The uber-doomsdayer crowd would likely think it was all part of a conspiracy related to the Plunge Protection Team but that would be silly ;).
Monday, July 16, 2007
Inflation Schminflation
For those who think that inflation is well-contained please see my earlier post on the linguistic challenges surrounding such words. You may also want to check out the latest from the UN, which suggests that schminflation is causing food to become so expensive that it can't afford to feed the World any more:
UN warns it cannot afford to feed the world
Silly UN, they should have been long CROX with their funds instead of buying corn...but I guess feeding the world means that you have to buy food instead of stocks. I'd imagine the same is probably true for most of us.
UN warns it cannot afford to feed the world
Silly UN, they should have been long CROX with their funds instead of buying corn...but I guess feeding the world means that you have to buy food instead of stocks. I'd imagine the same is probably true for most of us.
Another Deal Bites the Dust
This is becoming regular fodder for skeptical headline junkies like myself who have been watching the slow but ever-present deterioration of the credit markets as reality sets in:
KKR Cancels $1.4 Billion Loan to Refinance Maxeda LBO
...But what shocks me is that the equity markets remain as bouyant as a Barbie in a bathtub: U.S. Stocks Rise on Manufacturing Expansion
Maybe there is something to the idea that a weak-dollar can drive the equity markets both by hitting bogeys on the headline-front (as mentioned in the article) and in terms of asset "appreciation" in dollar terms as inflation is priced through...
KKR Cancels $1.4 Billion Loan to Refinance Maxeda LBO
...But what shocks me is that the equity markets remain as bouyant as a Barbie in a bathtub: U.S. Stocks Rise on Manufacturing Expansion
Maybe there is something to the idea that a weak-dollar can drive the equity markets both by hitting bogeys on the headline-front (as mentioned in the article) and in terms of asset "appreciation" in dollar terms as inflation is priced through...
Digg-ing Digg-like Sites
Although I disagree with the mentioned criticism's of Pownce which I thoroughly enjoy, this article also names some other cool sites that are worth checking out if you like Digg . The concept of a personalized filter does sound like an awesome concept, and as I discussed with some friends on Saturday night, it seems like the filtering-function of the Internet may be its most potent power.
Some Diggers Seek Alternatives: 6 Interesting Ones
Some Diggers Seek Alternatives: 6 Interesting Ones
The Future of the Future
Speculating about and attempting to predict the future are two of my favorite hobbies, so I enjoy it when I find others who are similarly inclined. The below article walks through some of the most exciting developments that are on the horizon (like in-home IMax's and nationwide WiMax's), and some that hopeful dreamers envision for the near future:
Five Ideas That Will Reinvent Modern Computing
Five Ideas That Will Reinvent Modern Computing
Friday, July 13, 2007
It's Friday the 13th: Dream of Virtual Worlds
This article highlights the creative lead that Nintendo has taken in the evolution of gaming, but one thing that struck me about the story was that the fact that Sony is launching a virtual world of the likes of Second Life:
"Called 'Home,' the service will let users create their own digital likeness, called an avatar, then mingle online with other gamers."
Microsoft, Sony to play Nintendo's game
So this Friday the 13th, don't have nightmares about Jason or Freddy - instead dream of the next few decades spent folicking in cyberspace interacting with people from around the globe.
"Called 'Home,' the service will let users create their own digital likeness, called an avatar, then mingle online with other gamers."
Microsoft, Sony to play Nintendo's game
So this Friday the 13th, don't have nightmares about Jason or Freddy - instead dream of the next few decades spent folicking in cyberspace interacting with people from around the globe.
A Quick Tax Lesson
Not that this will benefit any of us directly, but it is always interesting to check out the creativity that emerges when extremely well paid people pay smart well payed people to find a way around a problem...
Tax Loopholes Sweeten a Deal for Blackstone
The fact that congress has been spending the month debating income taxation just further highlights the disconnect between regulators and reality. (Thx to WLH for the article).
Tax Loopholes Sweeten a Deal for Blackstone
The fact that congress has been spending the month debating income taxation just further highlights the disconnect between regulators and reality. (Thx to WLH for the article).
Please...Somebody Buy Our Paper
This is hilarious...the first line of the story even quotes Lehman as "the biggest underwriter of mortgage bonds" before sourcing them for the info. on the health of the credit markets.
Lehman, Bank of America, Barclays Say Rout Is Over
That is like quoting Chiquita for the statement "bananas are healthy, you should eat one for every meal."
Maybe it is a joke...it is Friday the 13th and the author of the article's last name is Risk...good 'ole Bloomberg.
Lehman, Bank of America, Barclays Say Rout Is Over
That is like quoting Chiquita for the statement "bananas are healthy, you should eat one for every meal."
Maybe it is a joke...it is Friday the 13th and the author of the article's last name is Risk...good 'ole Bloomberg.
Good Conquers Old
New media seems to have defeated old media in the fight over online radio. Rumors have it that the proposed royalty rates that would have made online radio inpracticable have been defeated by public uproar. The blogosphere and KCRW had been blasting the message to their constituents and it seems to have worked.
Online Radio Is Saved; SoundExchange Will Not Enforce New Royalty Rates
Ironically I just started my own Pandora station this week. Glad progress can keep progressing.
Online Radio Is Saved; SoundExchange Will Not Enforce New Royalty Rates
Ironically I just started my own Pandora station this week. Glad progress can keep progressing.
Thursday, July 12, 2007
Vote of Confidence
It feels good when smart people tell you they like your ideas...it inspires confidence.
Well, some of the smartest people out there today may be the dudes managing the piles of capital better known as hedge funds. And these guys vote not with the ballot or in the press but with their wallets.
So, I gotta wonder, how good must these guys feel, with insider lists like this:
http://finance.yahoo.com/q/mh?s=MAQ
http://finance.yahoo.com/q/mh?s=HAC
http://finance.yahoo.com/q/mh?s=usq
http://finance.yahoo.com/q/mh?s=frh
http://finance.yahoo.com/q/mh?s=iii
http://finance.yahoo.com/q/mh?s=SHA
Must be nice.
Well, some of the smartest people out there today may be the dudes managing the piles of capital better known as hedge funds. And these guys vote not with the ballot or in the press but with their wallets.
So, I gotta wonder, how good must these guys feel, with insider lists like this:
http://finance.yahoo.com/q/mh?s=MAQ
http://finance.yahoo.com/q/mh?s=HAC
http://finance.yahoo.com/q/mh?s=usq
http://finance.yahoo.com/q/mh?s=frh
http://finance.yahoo.com/q/mh?s=iii
http://finance.yahoo.com/q/mh?s=SHA
Must be nice.
Nothing Like Optimistic Jargon
I remember it was less than two years ago when the term web 2.0 first got people buzzing. Well, it is time for people to move on...to Web 3.0 and hereof course.
But if you aren't ready for that you at least need to be aware of the fact that the Wii is really the future. I mean check out these gadgets.
How cool is it that you can not only teach your kid how to drive , but also get in shape using this thing!?!
Somebody else is noticing: Microsoft Plans to Cut Xbox Price to Compete With Wii and Sony cuts price on PS3 by $100, adds higher-capacity model
But if you aren't ready for that you at least need to be aware of the fact that the Wii is really the future. I mean check out these gadgets.
How cool is it that you can not only teach your kid how to drive , but also get in shape using this thing!?!
Somebody else is noticing: Microsoft Plans to Cut Xbox Price to Compete With Wii and Sony cuts price on PS3 by $100, adds higher-capacity model
Wednesday, July 11, 2007
Rehashing the Preliminary Mayhem
In case you haven't been keeping score, these two articles do a nice job summarizing the action over the last month or so:
Debt Market Woes: ARMs Are The Next Shoe To Drop
Subprime Losses Drub Debt Securities as Ratings Drop
The crescendo is just on the horizon...let's hope the climax is a nice long ridable wave. I don't know how to ride a short board.
Debt Market Woes: ARMs Are The Next Shoe To Drop
Subprime Losses Drub Debt Securities as Ratings Drop
The crescendo is just on the horizon...let's hope the climax is a nice long ridable wave. I don't know how to ride a short board.
Don't Worry it is Contained
According to some Fed officials, the $B's at risk of losses as the subprime debacle unfolds will not create "systemic risk". Wow, these guys should retire from the Fed and kick Steve Cohen out of his digs in Connecticut. I wish I could predict the direction of Beta and proclaim it from the hills:
Warsh, Steel Don't See `Systemic Risk' From Subprime
But then again, as the Fed-genius himself quips referring to the downgrade by Moody's yesterday: "I don't think that was entirely unanticipated. Sometimes I buy a stock thinking it will go up and it doesn't.''
Maybe he should watch The Princess Bride and learn a lesson on terms like "systemic risk" from Inigo Montoya
Warsh, Steel Don't See `Systemic Risk' From Subprime
But then again, as the Fed-genius himself quips referring to the downgrade by Moody's yesterday: "I don't think that was entirely unanticipated. Sometimes I buy a stock thinking it will go up and it doesn't.''
Maybe he should watch The Princess Bride and learn a lesson on terms like "systemic risk" from Inigo Montoya
Scarier Than Googleplex
Bigger numbers aren't all that scare something like Google. The future of facebook's grip on social networking has it shaking in its boots according to the below:
23-Year-Old Mark Zuckerberg Has Google Sweating
More likely Google is keeping licking its acquisitive chops and keeping a watchful eye on the evolution of networking on sites like Stumbleupon, Pownce, Twitter, and the like...although facebook will continue to be a force to be reckoned with as long as the add-on's don't get too annoying.
23-Year-Old Mark Zuckerberg Has Google Sweating
More likely Google is keeping licking its acquisitive chops and keeping a watchful eye on the evolution of networking on sites like Stumbleupon, Pownce, Twitter, and the like...although facebook will continue to be a force to be reckoned with as long as the add-on's don't get too annoying.
Tuesday, July 10, 2007
Death Metal to My Ears
As a follow up to the headline on S&P's downgrades:
"S&P chief economist David Wyss predicted subprime mortgage losses to peak in late 2008 and early 2009 on a conference call this morning.
The economist anticipates an 8% average national drop in home prices between 2006 and early 2008. So far, the US has experienced a 2.1% drop in housing prices, he said.
S&P said this morning losses on subprime mortgage bonds originated in 2006 and late 2005 were higher than they had modeled for when they initially rated the deals. The rating agency said it could not yet pinpoint how high losses would go."
And here goes Moody's:
Moody's Lowers Ratings on Subprime Bonds, S&P May Cut
"S&P chief economist David Wyss predicted subprime mortgage losses to peak in late 2008 and early 2009 on a conference call this morning.
The economist anticipates an 8% average national drop in home prices between 2006 and early 2008. So far, the US has experienced a 2.1% drop in housing prices, he said.
S&P said this morning losses on subprime mortgage bonds originated in 2006 and late 2005 were higher than they had modeled for when they initially rated the deals. The rating agency said it could not yet pinpoint how high losses would go."
And here goes Moody's:
Moody's Lowers Ratings on Subprime Bonds, S&P May Cut
Hacking a Hack of a Hacker
Shocked that the Lefties at CNN would hack a fellow Lefty like Moore, but then he hacked right back. Mudslinging on real issues is a helluva lot better than what people usually get up in arms about. I wonder if he will file suit.
'SiCKO' Truth Squad Sets CNN Straight
'SiCKO' Truth Squad Sets CNN Straight
Pessimistic Forecasting
IEA Forecast Underlines Oil, Gas Supply Worries
By 2012, Production Is Expected to Fall Short Of Global Demand
The report behind this seems long and lots of smart people seem to agree. This one doesn't sound good. I just hope the tech dudes can find away around it.
Medium Term Oil Market Report
By 2012, Production Is Expected to Fall Short Of Global Demand
The report behind this seems long and lots of smart people seem to agree. This one doesn't sound good. I just hope the tech dudes can find away around it.
Medium Term Oil Market Report
Efficiency of Human Capital
Taleb says that it is all random and these guys are just lucky; but somehow the fact that this guy left in time to hit a DOUBLE in the last six months on $B's of capital doesn't seem lucky to me:
Paulson Hedge Fund Gained 40% in June as Bear, Braddock Sank
I think it was this quote that was the clincher:
"John Paulson, the firm's president and portfolio manager...previously was a managing director at Bear Stearns"
Paulson Hedge Fund Gained 40% in June as Bear, Braddock Sank
I think it was this quote that was the clincher:
"John Paulson, the firm's president and portfolio manager...previously was a managing director at Bear Stearns"
Technology is Better Than
Point and click and order. Soon I will be able to do all my Amazon shopping through my Wii or Tivo.
TiVo Users Can Get Amazon Movies From TV
A two-tiered economy...old burns. New blazes.
TiVo Users Can Get Amazon Movies From TV
A two-tiered economy...old burns. New blazes.
Maybe Now it Starts?
Finally the rating agencies are starting to wake up and smell the rotting carcasses
S&P May Cut $12 Billion of Subprime Mortgage Bonds
The market reacted with a knee jerk, and the abx-indices still don't look that pretty:
ABX Historical Prices for the On-the-run Index
But the S&P announcement only relates to 2% of the outstanding and is of a better vintage than the worst of it (mostly 2005-06 junk). So this puts the lag at 18 mos...which could mean a long slow bleed. We shall see.
S&P May Cut $12 Billion of Subprime Mortgage Bonds
The market reacted with a knee jerk, and the abx-indices still don't look that pretty:
ABX Historical Prices for the On-the-run Index
But the S&P announcement only relates to 2% of the outstanding and is of a better vintage than the worst of it (mostly 2005-06 junk). So this puts the lag at 18 mos...which could mean a long slow bleed. We shall see.
Monday, July 9, 2007
Movies are Better than Math
I saw a great performance by the Decemberists and the LA Philharmonic on Saturday night...the combination of lyrics and the orchestra created an almost film-like vibe as the words and sounds transformed into images.
And then the next night I saw this concept perfected in the absolutely beautiful film Once. The film broke my heart and made me dream at the same time.
It also made me realize again (for the billionth time) that creating something worth sharing in the world is far more valuable than coming up with some theory on the inverse of Beta to the Aleph Naught...
Anyway, if you haven't you should absolutely see this movie.
And then the next night I saw this concept perfected in the absolutely beautiful film Once. The film broke my heart and made me dream at the same time.
It also made me realize again (for the billionth time) that creating something worth sharing in the world is far more valuable than coming up with some theory on the inverse of Beta to the Aleph Naught...
Anyway, if you haven't you should absolutely see this movie.
Inconceivable!
The following has some scary statistics regarding the amount of outstanding ARM's (Adjustable Rate Mortgages) that are already below the equity value of the assets they underwrote (estimated at ~$500B today):
Underwater ARMs ?
Main reason I needed to post this was the following quote from the article:
"Every time I hear the phrase "Well Contained," I am reminded of that amusing scene from "The Princess Bride:"
[Vizzini has just cut the rope The Dread Pirate Roberts is climbing up] Vizzini: HE DIDN'T FALL? INCONCEIVABLE. Inigo Montoya: You keep using that word. I do not think it means what you think it means.
"Well Contained": They keep using that word. I do not think it means what they think it means . . ."
Underwater ARMs ?
Main reason I needed to post this was the following quote from the article:
"Every time I hear the phrase "Well Contained," I am reminded of that amusing scene from "The Princess Bride:"
[Vizzini has just cut the rope The Dread Pirate Roberts is climbing up] Vizzini: HE DIDN'T FALL? INCONCEIVABLE. Inigo Montoya: You keep using that word. I do not think it means what you think it means.
"Well Contained": They keep using that word. I do not think it means what they think it means . . ."
Friday, July 6, 2007
The Future is Now
I can point my Wii remote at my television screen and watch you-tube videos. I can go into a virtual world in second life and have a second existence...and now Google is planning to transform telecomunications somehow...
Technology is much cooler than securitized lending:
Google: You ain't seen nothin' yet Forget iPhone, BlackBerry, Bell and Telus. Google is preparing to be the next giant of telecommunications
Technology is much cooler than securitized lending:
Google: You ain't seen nothin' yet Forget iPhone, BlackBerry, Bell and Telus. Google is preparing to be the next giant of telecommunications
Goethe is to Derrida
Just as the botanist Goethe laid the groundwork for the Hegelian conception of the Aufhebung which analogizes well to Derrida's "differance", so this article nicely analogizes the environmental dissipation of toxicity to the inability of the finanicial markets to digest mortgage risk:
The Ecology of Toxic Mortgages
It is a nice english language translation of some of the concepts tossed about below.
The Ecology of Toxic Mortgages
It is a nice english language translation of some of the concepts tossed about below.
Tuesday, July 3, 2007
Don't Be Greedy
As you head into the 4th of July holiday, remember to minimize your sun intake...you don't want to be too greedy:
Human greed takes lion's share of solar energy
Human greed takes lion's share of solar energy
Sunday, July 1, 2007
Collateral is Collateral
Poor Bear continues to take a beating for the rest of the industry in the headlines as the following article discusses the reality on the ground as Bear and others have started seizing properties through foreclosure at historical rates.
Bear Stearns Meets Possums in Georgia as Foreclosures Increase
The fact that some of these sales are taking place at half the purchase price of the homes, suggests that it may likely be more than just the unrated junk piece of the securitization that is getting wiped out...
But then again, maybe there is enough "diversification" to mitigate this effect. I wonder what Moody's thinks.
Bear Stearns Meets Possums in Georgia as Foreclosures Increase
The fact that some of these sales are taking place at half the purchase price of the homes, suggests that it may likely be more than just the unrated junk piece of the securitization that is getting wiped out...
But then again, maybe there is enough "diversification" to mitigate this effect. I wonder what Moody's thinks.
Subscribe to:
Posts (Atom)
