Leverage+complancy for the retail investor can be quite a learning experience and life altering no less.
The currency, commodity markets are full of similiar retail investors drunk on leverage and betting mama's house on the big payoff. Let's not forget the citizens buying 500K Plus homes with 50K incomes betting that RE always goes up.
Excellent job of explaining the con job by Brooks.
Free market idealists will ignore the suitability issue. The public needs to be protected from pig men like Brookstreet. Even the rich are non compus mentus in these complex financial instruments.
Last night Bill Moyers had on Gretchen morneson from the NYT to talk about the housing debacle.
It was a greatly simplified version of things, but she basically was blowing the Doomsday Whistle on housing. Worth a watch . . . the most negative sentiments I've heard yet on broadcast TV.
And Moyers . . . one of the smartest guys out there in journalism. i'm glad he's back.
I don't think anyone really knows. Depends on what happens to the 'C' - underlying collateral values - in those instruments and how much people & institutions are leveraged into the instruments that collateral supports. We don't know any of that do we?
If the valuations of the underlying collateral drops only slightly & folks aren't all leveraged up like Brookstreet - then its probably not the end of the world. The we'll all laugh about this someday. If not...
If there are a lot of knuckleheads out there like Brookstreet - chasing Alpha down every dark alley then a number of folks will get mugged. Then the contagion will spread.
I think that's why we all show up here - it is very uncertain.
FWIW - I don't think we'll see many more like Brookstreet - complete rubes way out over their head & drowning. Probably be plenty of the BS 'Enhanced Leverage' type failures though... big institutional hedges getting pinched & either closing or 'scaling back'.
A relief to know no one got hurt. After all, if they have so much to throw at stuff like this, the market is just relieving them of the burden of managing it.
Now, that alledgedly correct information is coming out of Brookstreet and the actual markdown that took place at National Financial, we have a new dilemma again or possibly the same one as pointed out by many previously including Fleck (my apologies for assuming otherwise based on incomplete information out of Brookstreet, the media, and National)-
this is whether downgrades must actually occur for markdowns to take place. The question of whether the third party pricing firms will act independently marking-to-market based on actual trades or whether they will wait for the ratings firms to move. If the latter is true as some suggest, the conflict of interest goes on, if the pricing firms act, in my opinion this alleviates "some" of the potential pressure on the ratings agencies.
The other question that comes to mind is why Fitch has moved ahead of the others, it seems these guys are typically like penguins. "If" what some say is true in regard to the agencies needing to downgrade before the securities are marked....
ok, which agencies? S&P and Moody's only or is Fitch recognized?
If I had lost $150k by buying some toxic crap, not knowing what it was, I sure wouldn't publicize it. Oh well, even pension fund managers will protest "But the salesman/broker/consultant said it was OK!"
Never underestimate the power of human stupidity.
Robert A. Heinlei
how do these people get the money to invest in the first place if they are that stupid. they can't possibly be making it through their own ingenuity. anyone that just signs paperwork without reading it on any investment they have deserves whatever happens to them
this is from gretchen morgenson at nyt on subprime "containment", hilarious!!
Suits
Only One Word for Subprime Mess
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By GRETCHEN MORGENSON
Published: July 1, 2007
It has been several months since the subprime mortgage market started hitting the skids. Whenever the mortgage drama takes a new turn like a hedge fund blowing up at Bear Stearns, as occurred in late June some high-level official is rolled out to calm investors.
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This Weeks Podcast (mp3)The trouble is, they all seem to have the same scriptwriter. In March, for example, Henry M. Paulson Jr., the Treasury secretary, said the subprime mess was largely contained. In April, Richard W. Fisher, president of the Federal Reserve Bank of Dallas, called the situation mostly contained. Ben S. Bernanke, the chairman of the Federal Reserve Board, has also used the word to describe the subprime problem.
Now the private sector is weighing in. At a conference in London last week, Timothy Bitsberger, treasurer of Freddie Mac, the home loan financier, called subprime woes severe, but contained. Not to be outdone, E. Stanley ONeal, C.E.O. of Merrill Lynch, said at the same conference that the slump was reasonably well contained.
Containment certainly seems to be the consensus. Only question is, how big a container? GRETCHEN MORGENSON
Dryfly,the quote is "no one has ever gone broke underesimating the intelligence or good taste of the american people" people seem to drop the second half of pt Barnum's quote a lot as well "and two to take him".I can't think of anyone who has based their business models proposed by these two who has failed to make good money.scientology is but one small example.
I think much of the world wealth is vapor. Most of it has found it's way to world wide real estate. It is a result of excess money supply from 3 sources:
Japan, US, and China.
Is that suits as in lawsuits, empty suits who sold this risky stuff, or "lost my suits and now I wear thrift store clothes" who bought this risky stuff?
A friend of mine explained(did not try to sell) to me once about how strips were the way to go if I thought that interest rates were going up, and I thought it sounded like a way to lose money in a hurry
The only good thing one can say about 'vapor' is its pretty easy to produce more of same. Though I'm not as confident it is nearly as easy to produce the stuff folks want to buy with the vapor. That's a much tougher gig to play well.
If this is a reference to "there's a sucker born every minute..." then, according to A. H. Saxon's book, "P. T. Barnum: The Legend and the Man" (1989), the full quote is, "there's a sucker born every minute, but none of them ever die" and it is unlikely Barnum actually said it. In the appendix Saxon notes that the phrase originated with a notorious con-man known as "Paper Collar Joe" (real name, Joseph Bessimer) and was later falsely ascribed to Barnum by show-biz rival Adam Forepaugh in a newspaper interview (it was reported that Barnum later thanked Forepaugh for the free publicity).
Whether it's Michael Milken -- was thinking of him just the other day since CDO's were invented at Drexel Burnham Lambert under his watch -- or Tony Robbins, Paris Hilton, Televangelists or what have you, I pretty much agree such concepts can make for a successful business model regardless. Flimflammery has a long, illustrious history in the United States; there can't be too many other places in the world where someone can remain a hero even after their deceit is discovered.
Well, air is a vapor; perhaps there is something about this that helps some people breathe ...hmmm, naw, forget it; getting a bit deep in here.
Tanta and Risk Capital, thanks for this stuff... unlike, seemingly, some of the readers here, I can glad imbibe as many of these MSM-decoding posts as you can generate.
What is most frightening are the surprising number of flat-out inaccuracies left in articles by reporters who should have finance as their specialty. Second-most frightening is the habit of repeating a culprit's lame explanations without followup or critique.
What is quite nice is that I can now read these kinds of articles and recognize when I'm having smoke blown near my nether regions. Thanks, folks.
A trainwreck is always a spectical! I've had a few people like this want to talk to me about investing my few pennies. VERY, few offered to show me how the system/methodology/idea works. Once that happens you know it isn't good. Anyways take it easy
-bix
Life is hard; its harder if youre stupid.
- John Wayne
Oh, that's a nice product to unload on retail investors.
Rates go up, you make less. Exactly the opposite of what you want. Oh, and duration increases as well. Sorry.
Rates go down? You make a good return, and duration goes down too, so you're back in cash in a low-rate environment.
Obviously, you should be compensated for taking this risk, but no retail investor has a hope of valuing a vehicle like this.
"I thought I was buying an interest in strippers"
Mark-to-zero
Leverage+complancy for the retail investor can be quite a learning experience and life altering no less.
The currency, commodity markets are full of similiar retail investors drunk on leverage and betting mama's house on the big payoff. Let's not forget the citizens buying 500K Plus homes with 50K incomes betting that RE always goes up.
Excellent job of explaining the con job by Brooks.
Free market idealists will ignore the suitability issue. The public needs to be protected from pig men like Brookstreet. Even the rich are non compus mentus in these complex financial instruments.
i thought it couldn't get worse than seeing 7 bear stearns posts a day...i was wrong.
thought it couldn't get worse than seeing 7 bear stearns posts a day...i was wrong
I take that as a dare. It's only noon in my time zone.
I take that as a dare. It's only noon in my time zone.
And its always 5PM somewhere (i.e. 'Happy Hour')... so we can take it.
I love the description of Brooks scam operation as a "family business".
I wonder if he's related to David H. Brooks, crooked defense contractor of $10MM Bat mitzvah.
Google him, he's a heck of a guy.
I love the description of Brooks scam operation as a "family business".
A family biz the Soprano's would approve of.
Last night Bill Moyers had on Gretchen morneson from the NYT to talk about the housing debacle.
It was a greatly simplified version of things, but she basically was blowing the Doomsday Whistle on housing. Worth a watch . . . the most negative sentiments I've heard yet on broadcast TV.
And Moyers . . . one of the smartest guys out there in journalism. i'm glad he's back.
I am really intersted in the bigger picture.
If it is just a con-job by brooks and a bad trade (short-long) that went really bad by BSC - do we really have a problem in the bigger market.
The CDO market is what $1T - $3T ?
the MBS market is what ?
do we have a problem in those $Triilon markets ?
Yal - Yes. Yes we do.
do we have a problem in those $Triilon markets ?
I don't think anyone really knows. Depends on what happens to the 'C' - underlying collateral values - in those instruments and how much people & institutions are leveraged into the instruments that collateral supports. We don't know any of that do we?
If the valuations of the underlying collateral drops only slightly & folks aren't all leveraged up like Brookstreet - then its probably not the end of the world. The we'll all laugh about this someday. If not...
If there are a lot of knuckleheads out there like Brookstreet - chasing Alpha down every dark alley then a number of folks will get mugged. Then the contagion will spread.
I think that's why we all show up here - it is very uncertain.
FWIW - I don't think we'll see many more like Brookstreet - complete rubes way out over their head & drowning. Probably be plenty of the BS 'Enhanced Leverage' type failures though... big institutional hedges getting pinched & either closing or 'scaling back'.
What's your take Yal? You are no dummy.
A relief to know no one got hurt. After all, if they have so much to throw at stuff like this, the market is just relieving them of the burden of managing it.
Now, that alledgedly correct information is coming out of Brookstreet and the actual markdown that took place at National Financial, we have a new dilemma again or possibly the same one as pointed out by many previously including Fleck (my apologies for assuming otherwise based on incomplete information out of Brookstreet, the media, and National)-
this is whether downgrades must actually occur for markdowns to take place. The question of whether the third party pricing firms will act independently marking-to-market based on actual trades or whether they will wait for the ratings firms to move. If the latter is true as some suggest, the conflict of interest goes on, if the pricing firms act, in my opinion this alleviates "some" of the potential pressure on the ratings agencies.
The other question that comes to mind is why Fitch has moved ahead of the others, it seems these guys are typically like penguins. "If" what some say is true in regard to the agencies needing to downgrade before the securities are marked....
ok, which agencies? S&P and Moody's only or is Fitch recognized?
If I had lost $150k by buying some toxic crap, not knowing what it was, I sure wouldn't publicize it. Oh well, even pension fund managers will protest "But the salesman/broker/consultant said it was OK!"
Never underestimate the power of human stupidity.
Robert A. Heinlei
oooooooooooooo! i will do whatever u say, just no more brookstreet!!!
translation-
let us out before you freeze redemptions-
Why the Rich Are Bailing Out - WSJ.com
how do these people get the money to invest in the first place if they are that stupid. they can't possibly be making it through their own ingenuity. anyone that just signs paperwork without reading it on any investment they have deserves whatever happens to them
Heinlein may have said that, but Einstein said it better.
Two things are infinite: the universe and human stupidity; and I'm not sure about the universe.
Then of course there was HL Mencken:
""No one ever went broke underestimating the intelligence of the American public."
this is from gretchen morgenson at nyt on subprime "containment", hilarious!!
Suits
Only One Word for Subprime Mess
E-Mail
Print
Reprints
Save
Share
Digg
Facebook
Newsvine
Permalink
By GRETCHEN MORGENSON
Published: July 1, 2007
It has been several months since the subprime mortgage market started hitting the skids. Whenever the mortgage drama takes a new turn like a hedge fund blowing up at Bear Stearns, as occurred in late June some high-level official is rolled out to calm investors.
Skip to next paragraph
Podcast
Weekend Business
This week: The launch of the Apple Iphone, China's trade problems, Susan Decker taking over Yahoo and riding the bond wave.
How to Subscribe
This Weeks Podcast (mp3)The trouble is, they all seem to have the same scriptwriter. In March, for example, Henry M. Paulson Jr., the Treasury secretary, said the subprime mess was largely contained. In April, Richard W. Fisher, president of the Federal Reserve Bank of Dallas, called the situation mostly contained. Ben S. Bernanke, the chairman of the Federal Reserve Board, has also used the word to describe the subprime problem.
Now the private sector is weighing in. At a conference in London last week, Timothy Bitsberger, treasurer of Freddie Mac, the home loan financier, called subprime woes severe, but contained. Not to be outdone, E. Stanley ONeal, C.E.O. of Merrill Lynch, said at the same conference that the slump was reasonably well contained.
Containment certainly seems to be the consensus. Only question is, how big a container? GRETCHEN MORGENSON
Dryfly,the quote is "no one has ever gone broke underesimating the intelligence or good taste of the american people" people seem to drop the second half of pt Barnum's quote a lot as well "and two to take him".I can't think of anyone who has based their business models proposed by these two who has failed to make good money.scientology is but one small example.
drfly,
what I think ?
I think much of the world wealth is vapor. Most of it has found it's way to world wide real estate. It is a result of excess money supply from 3 sources:
Japan, US, and China.
Wealth (even a small portion) is the means to make life easier as you pass thru it.
Suits
Only One Word for Subprime Mess
Is that suits as in lawsuits, empty suits who sold this risky stuff, or "lost my suits and now I wear thrift store clothes" who bought this risky stuff?
A friend of mine explained(did not try to sell) to me once about how strips were the way to go if I thought that interest rates were going up, and I thought it sounded like a way to lose money in a hurry
A similar story unfolded years ago for 'investors' in American Business Financial Services' "Investment Notes" and collateralized IO strips.
Litigation pending in DE...
I think much of the world wealth is vapor.
Me too.
The only good thing one can say about 'vapor' is its pretty easy to produce more of same. Though I'm not as confident it is nearly as easy to produce the stuff folks want to buy with the vapor. That's a much tougher gig to play well.
But you know the good thing about vapor? It evaporates!
On further reflection, that might not be a good thing.
" and two to take him."
If this is a reference to "there's a sucker born every minute..." then, according to A. H. Saxon's book, "P. T. Barnum: The Legend and the Man" (1989), the full quote is, "there's a sucker born every minute, but none of them ever die" and it is unlikely Barnum actually said it. In the appendix Saxon notes that the phrase originated with a notorious con-man known as "Paper Collar Joe" (real name, Joseph Bessimer) and was later falsely ascribed to Barnum by show-biz rival Adam Forepaugh in a newspaper interview (it was reported that Barnum later thanked Forepaugh for the free publicity).
Whether it's Michael Milken -- was thinking of him just the other day since CDO's were invented at Drexel Burnham Lambert under his watch -- or Tony Robbins, Paris Hilton, Televangelists or what have you, I pretty much agree such concepts can make for a successful business model regardless. Flimflammery has a long, illustrious history in the United States; there can't be too many other places in the world where someone can remain a hero even after their deceit is discovered.
Well, air is a vapor; perhaps there is something about this that helps some people breathe ...hmmm, naw, forget it; getting a bit deep in here.
Tanta and Risk Capital, thanks for this stuff... unlike, seemingly, some of the readers here, I can glad imbibe as many of these MSM-decoding posts as you can generate.
What is most frightening are the surprising number of flat-out inaccuracies left in articles by reporters who should have finance as their specialty. Second-most frightening is the habit of repeating a culprit's lame explanations without followup or critique.
What is quite nice is that I can now read these kinds of articles and recognize when I'm having smoke blown near my nether regions. Thanks, folks.
I think that's why we all show up here - it is very uncertain.
No, not that uncertain. Some of us show up because watching a massive train wreck unfolding in slow motion is totally, absolutely enthralling.
A trainwreck is always a spectical! I've had a few people like this want to talk to me about investing my few pennies. VERY, few offered to show me how the system/methodology/idea works. Once that happens you know it isn't good. Anyways take it easy
-bix
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