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.

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.

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).

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.

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 ;).

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.

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...

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

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

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.

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).

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.

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.

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.

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

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.

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

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.

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

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

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

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"

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.

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.

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.

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 . . ."

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

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.

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

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.