the good news is that the potato chip suit in california is now settled. California law requires very strict labeling. check it out. You may eat more potato chips now.
This is a perfect example of why I come to CR: nice balance between "candy-coated" MSM reporting and incessant negativity. Your audience wants to educate themselves, not take part in the senseless beating of dead horses.
Extending foreclosure time lines is merely providing more free rent to those being foreclosed upon. This should help them move on, provided they save the money and don't piss it away.
Liz,
I realize banks are not being agressive collecting seconds (HELOCs, etc.). I just don't know why that is. Why don't they hire Vinny's Collections the way the credit cards do? A friend of my sister passed away just after college from cancer. A collection company found her parents and started harrassing them, telling them they'd lose their house, blah, blah.
Banks have absolutely no morals and there are loads of unethical people out there who will take the work. Is there a law that prevents them from assigning the debt or sub-contracting the collection process? ...or, is this a special case of blood from a stone due to the magnitude of the financial failure??
Thanks,
Children have lost touch with the natural world and are unable to identify common animals and plants, according to a survey.
Half of youngsters aged nine to 11 were unable to identify a daddy-long-legs, oak tree, blue tit or bluebell, in the poll by BBC Wildlife Magazine. The study also found that playing in the countryside was children's least popular way of spending their spare time, and that they would rather see friends or play on their computer than go for a walk or play outdoors.
You mean, someone in the previous thread actually went off topic?. I can see the problem. That sort of thing can upset and disorient the massive worldwide
130-person readership of this blog at this hour.
Now I can comment on the banner ad gracing CR the last coupla days. Th one for "the most intense novel of the year" - "The Gargoyle" by Andrew Davidson.
Am I the only one who saw that and thought..."Is that the same Andrew Davidson?"
From The Sunday Times
August 3, 2008
Royal Bank of Scotland poised for biggest loss in UK banking history
Britain's second largest bank expected to reveal it has lost £1 billion in first half
"Housing Prices - Let me touch on this briefly. Prices are going to drop another 20-50% without a Depression. As we move into Depression, it will be an event we have never experienced at the scale we are entering..."
Dont read Mike Morgan if you are in a tall building.
I just had a chance to catch up on all of the comments posted re: CDS after I hit the sack.
MLM -
The auction mechanism bond guy gave some color on (and the concomitant inflated recovery values that can occur due to the notional amount of CDS far outnumbering actual cash bonds in case of default) is described - very well on Tradeable Credit Fixings These are the guys that run the auction process.
Bond guy's assertion that cash bonds are 1) tough to short, and 2) even tougher to cover is 100% accurate. This is probably the major reason for the CDS space expanding so rapidly in the past couple of years. Instead of getting stuck with whatever size a broker-dealer/insurance company/hedge fund has in terms of cash bonds, its much easier to just buy protection from a willing seller. The implicit leverage of CDS is an additional bonus to the buyer of protection - unless you're paying points up front (like protection on GM, for example), a CDS transaction is far cheaper in terms of cash going out the door than financing the purchase of a cash bond. Additionally, you can tweak duration however much you'd like to when buying/selling CDS - 1,2,3,4,5,7,10 year protection is all available, whereas with a cash bond, you are stuck with the original maturity stipulated at the time of issuance.
If CDS were traded on an exchange, much like eurodollars, S&P futures, etc, all of the problems myself and other posters have pointed to would be moot - your only counterparty risk would be that of the exchange (instead of buyers and sellers of protection meeting each other, each side would meet the exchange, and it would be the exchange's responsibility to ensure that the market reaches equillibrium). Greater transparency, better information, lower transaction costs, etc would result.
When I say that I have lost confidence in the efficacy of the product I trade, I mean that in its current form. CDS, if rethought and reworked, actually makes perfect sense, both as a hedging and speculative tool. However, in its current form, the market is just too opaque & convoluted for it to be able to withstand any significant stress event. Just my two cents.
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I just watched the "Powder the 44lb cat video" and was wondering how much longer before we see a video of a forclosed home owner abandoning their children when they move out.
Since we have already had the "suscide video" and the "abandoned cat video" I suspect it wouldn't be much longer.
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Seattlesu
Welcome to the swirl (to be interpreted as you will)...
What is your take on the efforts/discussion to try and convert the OTC CDS world into an exchange traded environemnt? Wishful thinking at this point or does that have any legs?
Remember those granite countertops that everyone just had to have. Well, now the scare is rising that they may be radioactive. Most are not considered a problem by the EPA but some might have a bit more uranium in them than is normal.
If buying a house with granite countertops, now you might want a radiation/radon test on them before you close.
I think TPTB would eventually like for much of CDS world to move onto an exchange - and I'm in complete support. I think they've just been distracted a bit with all of the other shoes that have been dropping around the Street. Getting the major banks to get on board with an exchange is like herding cats - one of the largest areas of profit growth over the past few years at most banks has been CDS & other OTC derivatives (we can get into bespokes if you want) due to the fact that when I give a price for protection, I'm really only competing with 20-30 other entities liquid/creditworthy enough for folks to actually buy protection from. This lack of competition means...drumroll...fat profits.
So yeah, longer-term, its moving to an exchange-based model, but for now, we'll be limping along & collecting outrageous (when compared to liquid, competitive, efficient exchanges) bid/offer spreads.
Where I'm at (East TN), it has been the trend to build a horse farm. These micro ranchs are now coming on the market at ridiculous prices. I'd read where some people were abandoning their horses at their boarding stables. I expect soon well here about the bank showing up at a foreclosed property and discovering that they have also gotten a pony.
Debt in the US is the biggest bubble and the mother of all the other bubbles. In this regard, Doug Nolland's weekly Credit Bubble Bulletin, for the past several years, is the best chronicle of the process that is headed straight to Greater Depression. (BTW, Greater Depression is a term that I coined after comparing the imbalances in the US economy in recent years with those during 1925-1934; the term has been picked up by few people who were on my e-mail list during 1998-2000, including James Davidson who wrote a piece with the title of "Greater Depression")."
"one of the largest areas of profit growth over the past few years at most banks has been CDS & other OTC derivatives (we can get into bespokes if you want) due to the fact that when I give a price for protection, I'm really only competing with 20-30 other entities liquid/creditworthy enough for folks to actually buy protection from"
This reminds me of the analogy of two traders on an island, buying/selling the island to each other over and over again and book the profits each time...it becomes fantasy land after a few transactions...
"energyecon writes:
What is your take on the efforts/discussion to try and convert the OTC CDS world into an exchange traded environemnt? Wishful thinking at this point or does that have any legs?"
My take is that central clearing may be the wave of the future, but that does not necessarily mean a futures exchange. I.e., there will be a clearing house, but it will clear customized transactions (within limits).
In the interest rate & volatility world, all that is needed for mark-to-market is a daily swap and volatility cube fixing. Any non-insane interest rate (and forex) product can be then priced off that grid. Everybody can mark to market daily their IR/FOREX derivatives (and thus adjust needed collateral) with the clearing house without needing standardized futures contracts.
This sort of standardization may be harder for the CDS market to develop, but I'm not certain either way.
Why is John McCain running almost neck in neck with Obama? Racism vs. Obama? Or what? (I'm seriously perplexed since it would seem the public isn't bothered by the recession all around it (them)). Explanations sought.
Thanks for views from the front lines - any assessment of the prospects of successfully transitioning into that state of the world - before another Conjure Clock rings its chimes?
I'd take that one step further - once clients & customers realize that they can isolate themselves from risk of their counterparty paying up on their obligations, and that it makes absolutely no sense for them to be paying fairly high transaction fees for standard transactions (i.e. 5 year protection, the most liquid), they will clamor for an exchange-traded, standardized product. Imagine how much easier that would be for mr. insurance company risk manager guy to deal with...
But that's still a few years off. For now, the "customized clearinghouse" you mention is probably where we go.
isn't it interesting, the parallels between CDS and oil futures and options trading.
in both cases the vast majority of trades are by speculators who don't own, build, produce or consume the underlying product.
regarding CDS... imagine being allowed to take out a life insurance policy on anybody on the face of the planet despite not having an "insurable interest"
i'm readding here and at other sites that "anybody" can participate on either side of the Credit default swap.
i have read that the notational value of oil futures and options trades has been up to 5 times the physical production and consumption of oil
the object of most traders is to liquidate the deal before physical delivery date arrives.
The racism card is the only card left for the right wing Klan and as more people see this type of nazi mentality and the ol' fashioned hate being vented from Old Republicans, the greater the thrashing. This type of simplistic scare tactic is just another branch or arm from the people that spooked America into The Iraq War and The Patriot Act and the decay of The Constitution. I'm a white guy, but I understand the reality of a diversified America, which is not made up of just rich white people that thrive on greed and power -- there are boatloads of Italians, Asians, Mexicans, Indians and a global list of many people that do not need The Reagan/Bush/McCain Bullshit!
.As Blythe Masters, global head of credit derivatives marketing at J.P. Morgan in New York points out: In bypassing barriers between different classes, maturities, rating categories,debt seniority levels and so on, credit derivatives are creating enormous opportunities to exploit and profit from associated discontinuities in the pricing of credit risk
A simple question that has been dogging me: why haven't the CDS cross-defaults already occurred?
Its tempting to think of CDS-writing as the ultimate 2006/2007 hedge fund tool: rake in the premium, show no volatility in returns (clients gotta love that!), then go mansion-hunting in the Hamptons. Oh, and if it (housing) blows up, no worries! Its OPM, and you can probably shut down and open a new fund anyway.
So, I imagine a lot of CDS on ABS was written by hedge funds with very little supporting capital. If that's the case, CDS is similar to a severely undercapitalized Lloyds of London. Following the analogy of Lloyds, we just got hit with multiple, simultaneous CAT-5 hurricanes (in the form of six-sigma ABS losses).
So why is the under-reserved, undercapitalized "Lloyds of London" still standing?
Its not as though anybody who trades CDS for a major broker-dealer actually owns any or has sold any protection, so a meltdown in CDS world would instead affect their lives by its second-order effects (layoffs, etc).
Beyond a certain point, most people on the Street receive their bonus compensation in company stock that vests on a 3-5 year schedule. The CDS/other derivatives traders that I know (who are probably a somewhat more skeptical bunch than most) have been hedging this "permalong financials" position that they have due to a large concentration of their net worth being tied up in company stock by 1) going long oil/other commodities in the past year, and 2) buying options on SKF, SRS, etc.
hope people caught the post by a person using the handle, if i remember correctly, tom joad? a texas RE-IBer
talked intelligently about problems in the Tx RE market...cracks just beginning to show and that many many banks in his state were not solvent in his opinion.
Can we go over some stuff about bilateral financial contracts? I'm curious about inter-party framework mechanics related to partnerships and entities as they relate to liquidity and obligations, i.e, the transfer of risk that is associated with this type of speculation and non-disclosure.
It is way to early to talk about depression. Healthy recession that forces most of the business dinosaurs to die out and us experience some work related blues is very possible. Depression, when unemployment goes beyond 12 percent is not very likely at this point.
I ve got headache, let's be optimistic. (later prolongs life)
The cross-defaults have not yet occurred due to the existence of a mysterious character who I referred to on last night's thread: Mr. Screaming Risk Guy Whose Only Exposure To Anything Approaching Sunlight Is That Of His Liquid Crystal Display.
His job is to investigate the ability of hedge fund/other non-broker-dealers' ability to pay. Additionally, there really haven't been very many defaults yet. However, I suspect that this party is only just getting started...
Does Screaming Risk Guy (that would make a nice handle, BTW) keep up with what the counterparty does after the fact? i.e. anything to keep those zit-faced hedgies from writing more protection to someone else a month later and Risk Guy is none the wiser?
You'd probably have to talk with a middle-office/risk management/legal person to get answers to the questions your asking. Most traders of CDS (at least at the broker-dealer level) aren't even remotely concerned with their counterparty risk - Mr. Screaming Risk Guy comes by, yells at them to DK the trade they just did with XYZ hedge fund for whatever reason, and the trader gets on the phone and has an awkward conversation. That's really it.
As far as the mechanics of CDS trades, there are pre-existing, standard contracts used (concerning the definition of the reference entity, what qualifies as a credit event, whether the contract is "modified restructuring" or "no restructuring", etc) and really all you can do as a line trader is:
1) Indicate your bid/offer
2) Indicate the size at which you are willing to execute
3) Indicate the duration of protection
and i have no personal knowledge about Texas RE...
Tom Joad sounded credible
as i point out from time to time (due for a repeat) i'm probably the dumbest guy in the room on the subjects of econ and finance.
learning here as a matter of survival
i'm a retired juvenile corrections staff, worked the front lines...i can share a lot of info about gangs, drugs and teen violence, but then that's way O OT!
This is a very good question. My hope is that Mr. Screaming Risk Guy works overtime, and that his tolerance for Vitamin D deficiency is abnormally high.
In all seriousness, I really don't know any more than I've already let on - and this is probably one of the more fundamental weaknesses within the broker-dealer model. "Risk guys" are never given the time of day to explain what they do/how they do it. They need to be better integrated into the operation...
Is this the pot smoking thread or the squirrel eating thread? I'm lost.
Did you know that prostitutes are about 250% more expensive in Costa Rica when compared to a similar girl in Bangkok? Did you know that Cambodian girls are even cheaper, though of lesser quality? Well now you do. 'Global whore prices' seems like good info for an OT thread.
For those in SoCal, La Zona Roja in Tijuana is a no-go. Total ripoff for inferior goods.
I can't tell you how many times reading your posts at work have resulted in an eruption of hysterical laughter, followed immediately by a catastrophic coffee burst across my bloomberg keyboard. Seriously, you're awesome.
Have you guys seen the "Cat Adoption Due to Foreclosure" video at the end of the previous post?
It's ridiculous from now on every negative event in the media is linked to "epidemic" of foreclosures.
As if couple of years ago there weren't several millions pets put to sleep every year.
GM is dead. Dead as in AMC dead. Dead as in dealerships turning into discount furniture and carpet outlets. Dead as in very soon.
Sure, some of you will say "so what!" You are ignorant. When GM dies it will resonate in the minds of J6P's everywhere as if the bell from Hell tolled just for them.
GM dying is like Thanksgiving becoming a day of Muslim reflection. Unthinkable. J6P will know then, the world has left them behind.
Appreciate your response, it is Management Agreements that ended up getting Enron in some trouble, and obviously traders have obligations to carry out strategies. My concern is that the traders are essentially tossing chips into a game where money has no reference and this casino mentality, the casino mechanics allow fraudulent contractual collusion to occur. Nothing has changed since Enron and the false and misleading abuse of indemnification obligations, i.e, there is no transfer of risk other than someone like you flipping casino chips in a game that is out of control!
Re: The definitions of a Credit Event, the relevant Obligations and the settlementmechanism used to determine the Contingent Payment are flexible and determined bynegotiation between the counterparties at the inception of the transaction.
This game is made up on the fly and as it grows larger without rules, anything goes and the bets can escalate as we play break the banks!
"Did you know that prostitutes are about 250% more expensive in Costa Rica when compared to a similar girl in Bangkok? Did you know that Cambodian girls are even cheaper, though of lesser quality"
"MLM writes:
Does Screaming Risk Guy (that would make a nice handle, BTW) keep up with what the counterparty does after the fact? i.e. anything to keep those zit-faced hedgies from writing more protection to someone else a month later and Risk Guy is none the wiser?"
My guess is that they will increase the needed collateral to support trades.
In the first "correlation blowup" (when Ford & GM went to junk) the story I heard was that the investment banks threw out what I think they called "Texas Hedges".
They shorted any liquid risk asset they could, on the hope that they would blow up at the same time as their hedge fund counterparties.
...but Mr. Screaming Risk Guy wasn't around in '06 and early '07, or at least he was locked in a broom closet. Right?
...but even if there have been few "defaults", there has been mark-to-market for hedge funds, and the margin calls following those marks would have wiped them out. We should have seen the HF's positions wind up on their CDS dealer's books (Lehman, JPM?) as a marked-to-market position coupled with a loss from margin lending.
One can only conclude that either: 1) they're really fudging the marks (even now?); or 2) undercapitalized hedge funds were not big writers of CDS.
The Contingent Payment can be effected by a cash settlement mechanism designed to mirror the loss incurred by creditors of the Reference Entity following a Credit Event. This payment is calculated as the fall in price of the Reference Obligation below par at some pre-designated point in time after the Credit Event. Typically, the price change will be determined through the Calculation Agent by reference to a poll of price quotations obtained from dealers for the Reference Obligation on the valuation date. Since most debt obligations become due and payable in the event of default, plain vanilla loansand bonds will trade at the same dollar price following a default, reflecting the markets estimate of recovery value, irrespective of maturity or coupon. Alternatively, counterparties can fix the Contingent Payment as a predetermined sum, known as a binary settlement. http://www.investinginbonds.com/assets/files/Intro_to_Credit_Derivatives.pdf
Now we get into Level 3 and QSPEs and the actual cash burn related to defaults and mis-manged casino chips that require Taxpayer bailouts.....This is bullshit and needs to be shut down like a crooked mafia casino-linked to a crooked Treasury and Fed, et al ...
oldtrader: Prostitution is a skill like any other profession. A good prostitute is friendly, confident, and makes her client feel as though they have an actual ongoing relationship. She carries conversation well, even if her client speaks a different native language. She reads body language, and moves the client into his comfort zone with ease. She is aggressive when desired, submissive when demanded, and always in control of the interaction, even when it appears otherwise.
Appearance is a subjective thing, and high-dollar working girls are not always talented working girls. Take the Russians, for example. They are some of the most beautiful working girls on the planet, but their style of service is on par with Big City American working girls.... about a 6 out of 10.
Thai ladies will make you feel like you've known them for years, take little money, and will seem to read your mind. They know men. Cambodian girls try hard, but lack the experience with Westerners to be able to pull off the act in a convincing way.
Mr. Screaming Risk Guy has always been free to roam and vociferously object to any and all trades. Its just that nobody started listening to him until August 07...
"I think that the current difficulties, the current duress, I think the most likely scenario with respect to all of that is that it will likely continue for quite some period of time, could get a little bit worse," Rubin said.
"There's always some chance that matters could get better more rapidly but I think that's very low probability," he said. "And there's some chance, and hopefully it's a low probability, that things could get considerably worse."
Why do I think that teen delinquents and prostitution are not off track when talking about Wall Street? Hmmmm,...
CSC- did you catch the timeline on the last post? Apparently if you time it right you can stop paying and live rent free for a long while,...but you'd better have you're strategy mapped out ahead of time.
sdtfs: Dude, THANK YOU for the heads up. I'll go check it. The Mrs. and I have a plan for the future and are seriously watching the feasibility of walking away. If the free rent time is long enough, we will turn into deadbeats. It's still surreal entertaining thoughts of just refusing to pay when we can... but times are whacky.
Currently Smoking Cannabis wrote
Prostitution is a skill like any other profession. A good prostitute is friendly, confident, and makes her client feel as though they have an actual ongoing relationship
CSC
when i was about 20 years old i was in a bar with several hippie friends and friends of friends listening to a band and drinking beer.
one of the girlfriends of a friend of a friend shared with me that she was a "working girl"...this while her 'boyfriend and others were on the dance floor...although one other couple was still seated at the table with us.
i announced proudly that i never had need of such services and even if i did it just was something i wouldn't do.
she asked me to show her my hand...from across the table, i thought she was going to read my palm or something
( she was very particular that it had to be my right hand)
she then proceeded to talk dirty to me and draw a line in and out and around my right hand
when she was done i said i was convinced and would be willing to pay for her services.
she said "maybe some other time, and smiled"...i got her point.
Years ago, before Credit Default Swaps, I was a Screaming Risk Guy. In those days we looked at counterparty risk accross the organization. This would include unsecured loans, interest rate swaps, commitments, and any other exposure with a counterparty. The measure of counterparty risk at that time was updated daily, and there were daily limits on traders to control the intraday risk. Of course, traders hated us, and complained endlessly about needless controls put in place by mindless idiots. Like any part of banking there is an oscillation between too much control and not enough. We all know where we are now.
This CDS stuff, this derivative shit, the abuse of taxpayers by this corrupt Federal mafis gets back to this >>> FRAUD>>>> Money laundering is the practice of engaging in financial transactions in order to conceal the identity, source, and/or destination of money, and is a main operation of the underground economy.
In the past, the term "money laundering" was applied only to financial transactions related to organized crime. Today its definition is often expanded by government regulators (such as the United States Office of the Comptroller of the Currency) to encompass any financial transaction which generates an asset or a value as the result of an illegal act, which may involve actions such as tax evasion or false accounting.
Is the Bush Coup selling drugs like Reagan and The Contras???
"I suspect we will see more of this given that housing has in fact bottomed as evidenced by the 3mo rate of change in Case Sciller and New Home Sales which have both turned positive."
So housing has bottomed because the drop is slowing down? The latest Case Shiller numbers in no way pointed to a bottom in resale.
And New Home Sales at foreclosure prices have turned positive is somehow a positive? Here's a hint when one or more major public home-builders goes BK that will be an indication that we can start working off some of the excess.
We've just finished the sub-prime write-downs and haven't even hit the alt-a, prime, credit card, auto, commercial write-downs and you're already calling for a V-shaped recovery.
Let me know what you're buying so I can short it please.
Anyone remember when a market was as tightly range bound as the QQQQ has been for 5+ weeks? It's been impossible for a "position trader" like myself to stay short, as day-to-day and intra-day it's down by 2% and swings back up.
Because of where the untested price/volume is concentrated (at the July 15 lows - just like the other markets), I expect this to resolve downtown, perhaps after a bit more consolidation, but I think Tech (and Financials) will lead the next wave down in equities as it did from the top in Oct 07.
So QID looks good (or short QLD) for a position/intermediate trade.
Well Tanta I did not exactly "freak out", And even after reading your reply, I am still sure that this will not help Freddie one bit.
You are correct that I misread the statement on housing wire and while your rant
It says that the total allowable (which word does not rhyme with "required") timeline is 300 days in total from last payment made to FC sale. is true, I never said or even implied "required". You make it seem as if I did.
Because of the risk to the servicer, if I put myself in the servicer's shoes I would consider dumping these loans as fast as I could. Of course the servicer is going to do what it can to minimize its losses or maximize its profits under the new guidelines, regardless of what Freddie thinks it may be accomplishing.
And if what you suggest is true that this is only an increase of 30 days from 270 to 300, by the time it gets to 270 days I would suggest the loan is a lost cause. So even if it is just another month that is still another month of freeloading. And on the off chance that you are wrong and it is really a 60-90 day extension not 30), then it is another 2-3 months of freeloading.
I do not think that will do Freddie any good, and I certainly doubt that a second (third), workout will do Freddie any good.
That moves smacks of desperation IMO,and it is also a way to pretend these loans are current, understating the nature and extent of the problems.
Freddie is desperate IMO, willing to try damn near anything, is how I read the situation.
It will not work because unemployment is poised to soar, and the housing bottom is likely years away.
Finally, I admit that I do not like Fannie and Freddie for the simple reaon that neither should be in existence.
I said they were a moral hazard and I was right and I said they wold cause a huge taxpayer bailout and I was right (one is coming).
I resent having to bail out these institutions and the boldholders like Bill Gross who bet on it.
Wall Street Is an underground economy with no regulation. There are no audits or accounting that honestly describe the nature of the fraud that goes on within this pirate/mafia casino -- BUT, taxpayers need to bail out all the bad bets made by traders that are acting under the authority of someone else, who is connected to a chain of illusions and threads that all end up in The White House, where lobby groups sleep beside crooks that steal Americans blind! Isn't it nice to have a guy like Paulson act as a puppet for SIFMA and write new laws?
Why did a lot of things happen the way did in the 70s? They were (and still may be) sold as "Hollywood Ceilings." (Some popcorn ceilings has glitter mixed in.)
The 70s saw real growth and innovation (reliability) in small power tools. For a long time Makita built market share and eventually whipped other brands such as Rockwell, Ingersall-Rand, and others by launching the cordless revolution, but that's another subject.
Another factor may be that spraying a ceiling was appreciably faster than rolling it, reducing labor costs - despite the time to set up and clean up. Still another might have been that defects in the ceilings were considerably easier to fix, or ignore, making the overall job of painting more economical.
Tanta seems to have given permission for comments OT. I have been doing yard work all day and have been burning over an ad in the morning paper from the local realtors association. I need to vent and this seems like as good a place as any. I swear that they, the Realtors, ran an ad assuring people that real estate values will continue to double every ten years. That is how we got to where we are. People quit buying shelter and started looking at residential real estate as a get rich quick scheme. Have the Realtors no shame? Go back to selling shelter. Not as much money but you can look yourself in the mirror in the morning.
Default - a question (request for a confirmation, really):
Several people have asked here how hedge funds and everyone else find counterparts for their CDS trades. My understanding is that most hedge funds trade with their primary broker, who then enter into a matching trade with someone else.
So, in the case of, say, a Company hedging a direct risk and contracting with a hedge fund at WSBD (wall st broker-dealer), both the hedge fund and the company will transact through WBSD - with two matching trades. The interesting thing about this being that instead of $10 mln in notional outstanding, we now have $20 mln in notional outstanding.
And likewise, if two hedge funds transact, each using their own WSBD, we now have $30 mln in notionals outstanding.
And then, if the next month each of the hedge funds decides to hedge the previous month's position using the same WSBDs (and for some reason it's not practical to cancel the previous trades), we end up with $60 mln in notional outstanding. Even though, in theory, all of these positions offset each other.
Of course, in reality it's even bigger numbers and a greater number of counterparts, and - in reality - many of the notional offsets and matching trades do not match perfectly in size/duration/basis etc.
I bring this up because of the usual confusion about how there could be $60 trillion (or whatever today's number is) of these things outstanding, when the process of actively trading pretty much requires that the notionals outstanding grow exponentially.
It's like every time we needed to trade a share in a company, we needed to make two new ones: and then never got around to cancelling the offsetting ones at the end of the trading day, just had everyone keep their own running tally of who owes what (like kids trading favours).
Unfortunately, I also agree with your analysis that even if 99% of all this stuff cancels out - in theory - the process of getting there could be long and freeze markets for longer than anyone thinks possibly.
And, final thought, the problem with hedging is that even when it all works mathematically, the formulae give you jack shit when you can't realize your hedge on the market. Resulting in terrible losses as all the hedges which are needed to back the other side of the "arbitrage du jour" fail, and the margin calls can't be made on the other side of the trade.
Transparency and disclosure still need improvement. Chinas young credit-rating agencies are not considered reliable, so bond prices may not reflect market expectations of a companys ability to pay. Many investors still avoid corporate bonds, believing they are not being adequately compensated for the risk of default, because they cant calculate it.
There are currently five domestic rating agencies: China Chengxin International Credit Rating (CCXI), China Lianhe, Dagong Global Credit Rating, Shanghai Far East Credit Rating and Shanghai Brilliance. They are all working with the CSRC to devise better models. In the meantime, Standard & Poors and Moodys Investor Service have local JVs with Citic Securities and CCXI, respectively but its still not clear what they will be allowed to do.
And if what you suggest is true that this is only an increase of 30 days from 270 to 300, by the time it gets to 270 days I would suggest the loan is a lost cause.
It would help if you commented on the thread under this one, Mish.
You still aren't getting it, though. By the time the loan gets to 270-300 days, THE FC IS COMPLETED AND IT IS ALL OVER.
You still want to read this as 270-300 days until FC is STARTED.
It is no more than 150 days from last payment made until FC is started.
It is no more than 150 days after FC is started that it is completed.
The amount of time it takes to complete a foreclosure is mostly a matter of state law. Freddie is saying that servicers can take 30-60 days longer than the bare minimum required by state law to complete a foreclosure.
But even if servicers take only as long as the law requires them to take, realistically FCs are going to take around 120 days from start to completion, because that is the average time required by state law to get through the legal process.
Unless you want servicers to start FC the minute a borrower's payment is one day late--and I assume you wouldn't advocate anything that dumb--then FCs will take at barest minimum 210 days (90 days to get to FC start, 120 days to get from there to completion). It doesn't make jack difference what some servicer might want or not want. The law is the law.
If you think states that have a due process of law for foreclosure of 120 days or more are "encouraging freeloading," then take it up with the state legislatures. The rest of us libertarians will be glad that the law makes it a touch difficult for private parties to take people's property away using the coercive force of the state.
Calls on SKF and SRS? Why? SKF and SRS are good for short term plays and thats about it. Makes way more sense to get puts on URE and UYG. Volatility degrades both the double longs AND double shorts.
Consider the following 1 yr returns:
IYR (x1 long US Dow RE Index): -12.9%
URE (x2 long US Dow RE Index): -32.5%
SRS (x2 short US Dow RE Index): -13.9%
IYF (x1 long US Dow FI Index): -31.9%
UYG (x2 long US Dow FI Index): -59.9%
SKF (x2 long US Dow FI Index): +40.0%
Over the past year it would have been better to be in IYR than URE despite the index going down. It would have been better to have puts on URE. If you have held SRS this year you got screwed.
Similar story in the financials although they are at least in the right direction. Again, it would have been better to have puts on UYG.
Anybody know anything good/bad/whatever about GE Funds(Mainly GE Fund's Money Market) and GE's Interest Plus Money Market? Rumors welcome unless you make them up on the spot.
GE Retiree: GO to the website and read it is the best way for you decide.
From the site:
The Fund invests primarily in short-term, U.S. dollar denominated money market instruments. The Fund's investments may include U.S. Government securities, repurchase agreements, commercial paper, certificates of deposit, variable rate securities, asset-backed securities, foreign debt securities, Eurodollar deposits and domestic and foreign bank deposits.
The Fund invests consistent with regulatory standards governing security quality, maturity and portfolio diversification. For example, the portfolio manager limits investments to high quality securities with remaining maturities of up to 13 months and limits the weighted average maturity of the Fund's portfolio to 90 days or less. The Fund may invest more than 25% of its total assets in the domestic banking industry.
All of the Fund's assets must be rated in the two highest short-term rating categories (or their unrated equivalents), and at least 95% of its assets must be rated in the highest rating category (or its unrated equivalent), by a nationally recognized statistical rating organization. Additional information about the money market instruments in which the Fund may invest, including rating categories, is contained in the Statement of Additional Information.
Lest anyone try to make me feel stupid -- which I'm sure no one would want to -- Alan Greenspan had this to say about today's "complex hybrid financial products" ..."in many cases, seemingly challenge human understanding."
So, my human understanding of CDSs is challenged. Okay, there is a "buyer" of a contract that bets some company will default on its obligations. There is a "seller" of that contract which bets that the company won't default on its obligations.
Then, there is the company that may or not default. Am I right so far? The "buyer" gets an insurance policy so he won't lose on his bet. Does he buy that insurance policy from Ambac or MBIA?
"Greg writes:
Default - a question (request for a confirmation, really):
Several people have asked here how hedge funds and everyone else find counterparts for their CDS trades. My understanding is that most hedge funds trade with their primary broker, who then enter into a matching trade with someone else."
I'm only guessing, but I think pretty well any hedge fund would be set up to trade with a number of brokers. Having only a single counterparty would be suicidal, as they could blow you out of the water on margin calls any time they want. They need to set up agreements for trading with each one; not sure how they handle the back office side.
The brokers will generally not mechanically match trades, rather they will absorb the position in their book, and then only hedge the book exposures if they get out of line. The only time they mechanically match trades is if there is no liquidity in whatever is being traded.
great stuff from default and bond guy here. thank you, gents, for sharing your experience and knowledge with us!
what scares me more than anything are not the first order effects...paper is evaporated and money pushed around the table back and forth with some trailing zeros that, ultimately, don't mean much, but the net of that. liquidity is just gone and the credit markets are about three millimeters away from seizing up totally. this is what's going to kill the economy.
take the case of GM. they stop leases, can't give as favorable financing terms and people have to take out 6 years loans on a car. say what you will about GM's management, lack of vision, quality and all that, but it isn't fatal. this is a fatal infection that, if it goes on for long, will systemically kill the patient.
Default - It occurs to me that since CDSes are over the counter trades, Screaming Risk Guy has no idea how many CDSes the counterparty has already sold on the same RE to other parties or many other parties. What am I missing?
also i might add that the capital markets for most businesses are a mess right now. if you don't draw down your lines before they cut them, you're screwed. you're screwed on all debt positioning too. so the only avenue is, right now, equity raises and those are terrible for your WACC with debt cost high.
perversely, if you're a start-up that is doing decent you're sitting pretty right now because it will be cheaper and more effective to keep you going by capital injection right now. lots of start-up are getting lifelines where, if the markets were more functional, they'd be getting unplugged.
Thanks. I was oversimplifying, of course, and should have made that explicit. Funds will of course transact through several counterparties, not just one.
My point is that the hedge funds (for example) will primarily trade through broker-dealers, not directly with "others." In fact, just about everyone will mostly trade through broker-dealers.
The same point holds regarding the broker-dealers holding the positions and offsetting their position separately (it's not actually simultaneous), but the effect is the same as in my description (even if the market is liquid, they're taking the trade at that point because they know the price).
Let me give you a slightly different scenario: party A (conservative boring company) wants to lay off some risk, the underlying instrument has no liquid market (for example, because it has a bunch of strange features, even though there are comparables). Hedge Fund B wants to take that risk on, and at a reasonable price, but Party A won't/can't transact with the hedge fund directly. But the friendly broker-dealer is willing to interpose with perfectly matching contracts...intermediating a transaction that would not have otherwise worked. Again, twice the notional exposure due to the intermediary.
Rubin, now chairman of the executive committee at Citigroup, said Obama's policies could help return the country to the rosier economic times of the Clinton administration when the federal government had budget surpluses.
"We started the decade with surpluses and we had good federal revenues," Rubin said. "But instead, because of the fiscal policies put in place, we had deficits through all this period.
"What Senator Obama has said is that he is committed to restoring sound long-term fiscal conditions," Rubin said. "I think that's essential if we're going to have a good and strong economy. He said he'll pay for everything he's going to do with respect to Social Security and Medicare."
Mr. Screaming Risk Guy has always been free to roam and vociferously object to any and all trades. Its just that nobody started listening to him until August 07...
When the lawsuits start to fly, Mr. SRG who was supposed to sit down with Mr. Compliance Officer and go through the printed trade runs for the day, will have a problem. Law suits always name Mr. Compliance Officer as a party-- and Mr. Compliance Officer usually has Mr. SRG's initials on 'every' trade. It's called CYOA. If it gets really bad, it' also called Rogue Trader.
"At The Movies writes:
This has been bugging me for quite some time.
Why were popcorn ceilings so popular in the 70's?"
Can't say if this is cause or effect, but when I was renovating homes at that time I had difficulty in finding skilled craftsmen that could do a smooth ceiling. Workers in those days in NE were mostly caucasion. Problem was solved with the influx of large numbers of Caribian and Mexican plasters that had that skill.
It's instructive to compare what's currently happening to the auto sector and the U.S. economy with what we saw in the wake of the 1990 oil shock.
Sales of light trucks manufactured in North America, which category includes the once almighty SUV, remain deeply depressed, with July sales down 26% compared with last year.
Some people (mentioned here, for example) are denigrating the GDP report, which appears to show a 1.9% rate of real growth, on the grounds that the deflator used to convert from nominal GDP to real GDP is artificially low because it doesnt include imports (which have become more expensive, due primarily to changes in the price of one dark, viscous liquid that is included in their number).
I don't know why they don't enforce 2nds, but so it is.
I also don't know why they don't file for efficiency judgments, but they don't.
I don't know why people don't settle, when offered a reasonable settlement, but often, they don't.
I also hate popcorn ceilings, which I
am afflicted with in this house. My old house had 'em and after destruction by hurricane Andrew, was replaced by something very nice called "knock-down".
Extreme erudition and nerdiness mixed with extreme hilarity. Somebody ought to print it and send it to various MSM people, just to show them why we are posting here, instead of watching tv (or Shakespeare).
That thread is a high point of our civilization. I mean it.
The average iq of the participants must be staggering. And I'll bet that Misean dragged a 7th brain cell into the fray, no matter what he says.
That's because you were so freaking funny we're all trying to catch our breath. Does glod flick me off like a booger???? Not the last time you'll see that question.
Ok, somebody pays some money for all those hedges. Where does that money go besides commissions? Does it purchase something valuable, an acrea of farm land, a lump of glod, a jug or whine, a loaf. Does it get invested in mtg backed securities? Is there any there there upon default?
Things could get ugly,'' said Jonathan Ravelas, a strategist at Manila-based Banco de Oro Unibank Inc., which manages about $5.9 billion in assets.We could see more downside from here as corporate earnings are released.''
The MSCI Asia Pacific Index dropped 1.8 percent to 130.63. Japan's Nikkei 225 Stock Average lost 1.8 percent. Most benchmark indexes across the region declined.
I asked earlier what could explain why McCain is running almost neck and neck with Obama. I posited possible racism. But then I remembered H L Mencken. Remember him? He was the person who demonstrated his eternal insight into Americans with the remark that "one can never underestimate the intelligence of the American public." Truer words have never been spoken. Recent proof is the mouting enthusiasm for "solving" the gas crisis by drilling in coastal waters. In spite of almost universal expert opinion that this is stupid and futile, Americans adore the idea. It is such a PRETTY idea. Cute one might say. So much so that Obama has had to cave into it. McCain of course did so early since he knows that the stupider the idea the more popular it will be with the US public. One has to conclude that McCain should probably win since Americans would be uncomfortable to the point of hatred with a President with brains. The dumber the better.
jim writes:
I asked earlier what could explain why McCain is running almost neck and neck with Obama. I posited possible racism. But then I remembered H L Mencken. Remember him? He was the person who demonstrated his eternal insight into Americans with the remark that "one can never underestimate the intelligence of the American public." Truer words have never been spoken. Recent proof is the mouting enthusiasm for "solving" the gas crisis by drilling in coastal waters. In spite of almost universal expert opinion that this is stupid and futile, Americans adore the idea. It is such a PRETTY idea. Cute one might say. So much so that Obama has had to cave into it. McCain of course did so early since he knows that the stupider the idea the more popular it will be with the US public. One has to conclude that McCain should probably win since Americans would be uncomfortable to the point of hatred with a President with brains. The dumber the better.
jim | 08.03.08 - 9:00 pm | #
Like a multiple choice test - never change an answer... your first choice was probably right (racism). O might win but he'll have to swim against that current as well as beat McCain on the issues. Not sayin' its right - just sayin' it is.
Oh and I am certainly not suggesting all or even most potential McCain supporters are racist - but in a close contest like this & considering our history to deny race isn't part of the mix is to deny the obvious.
One last thing jim - I'm lukewarm to both candidates for different reasons... BUT I still expect McCain to win easily from an electoral college perspective... I think McCain will get more than 300 electoral college 'votes' with the same battleground states as always making the difference... OH, FL, PA - O needs most if not all and I don't think he wins a single one of them. He will also struggle in WI, IA & MO - again O is likely to be shut out though not by as much.
The parts of all those states he needs to make ground in are the areas I know well - white redneck blue collar areas. Think south-central Ohio, western Pennsylvania, north & western Florida (panhandle).
It will be a tough sell to get those folks on board... it won't be enough for O to just say "Vote for me - I'm not the Republican"... They will want to know... "Okay, so what can you do for me? For my problems?" What can O tell them they haven't heard already? O's team finds a CREDIBLE answer for that and they might get those voters. They aren't even close to that so far...
I saw Rubin interviewed lately & they asked him if he wanted to be SotT - he said 'NO WAY' - but he said he has people he could suggest O hire...
I thought 'Oh, great - just what we need, another heavy hitting exec of a failing IB placing hand picked cronies into Treasury - no conflict of interest there.'
I'm not sure he (and Paulsen) aren't more dangerous out on the loose than in the confines of the Treasury.
dryfly:: well racism in part but it is really stupidity behind it all. The nonsense about drilling in the coastal areas makes it clear most Americans are very stupid. You might say "uninformed" but they are and remain "uninformed" because they are too stupid to get informed or respect the people who could inform them. When a 'brain' tells them something they reject it since they don't like 'brains'.
That so many Americans would want a continutation of the last four years even though at the same time they say they want change is clear proof of addled brains and confused thought. If Americans elect McCain they will richly deserve what they get as a result. Of course they will even be too stupid to know they have screwed themselves. Not much hope.
Can't speak for anyone but myself, but, after watching the Dems in Congress fall all over themselves for the past year and a half to KEEP the HOUSING MARKET INFLATED beyond the reach of hard working Americans and then hearing Obama prattle on on CNBC about how the "Government needs to put a floor under home prices"....Well.....I just snapped and decided to never vote Democrat again. Period.
Then there's the small matter of the Fan/Fred/Housing Bailout vote in Congress last week.
And all the food and oil inflation that's been caused by their total kissing a$$ of Bernanke, Paulson, the REIC and Wall Street.
I'm of the opinion now that the absolute worst disaster for poor, lower and mid income people in this country is for the Dems to be in power. Their love affair with inflation is killing those people.
At this point, I wish the Dems would just go the way of the Whigs. I'm through.
Yeah yeah yeah, Obama's great, I'd like to have him over to the house for dinner and a chat, good company I'm sure.
You're really grabbing at straws there jim with the racist thingy. Following your line of reasoning, how the heck did he get the Democratic nomination....hmmmm?
Dryfly - I wish I could say I'm 'lukewarm'. I'm more in the 'violently opposed to either of these candidates.' camp at the moment.
I never thought I'd see this country lose it's place as top economic power in my lifetime. That will probably happen inside of 10 years now. Neither one of these jokers will forestall that. They just don't understand that the economy is the #1 issue, and even if they did, they have not the first clue what to do about it. And fuckall if one can defer to Austin fucking Goolsbee to fix it all so we can all go back to bickering about bullshit 'racial differences' or Britney Spears or your distraction du jour.
I'm trying to figure out how to sell an
entire piece of land ten times, to ten
new "sole owners".
I think it will work best if the
parcel does not actually exist, as
long as they don't actually want the land.
Who can I call on RICO Street to
set this up for me, and hedge the loans ?
I hear there is always a market for anything.
.
waitinginPNW writes:
You're really grabbing at straws there jim with the racist thingy. Following your line of reasoning, how the heck did he get the Democratic nomination....hmmmm?
waitinginPNW | 08.03.08 - 10:51 pm | #
Spend time in Middle America like I do - there is CLEARLY a race element working. Real time - not drive by.
There are folks out there - working class - who have absolutely no reason to vote GOP... the GOP has waged economic war on them for decades... Dems too but GOP way worse. They voted for Bill C but mostly went GOP the last 30 years for strictly 'God & Guns'.
There was no way they would vote either Hillary (sexism) or Obama (racism)... This race/gender talk is the po'white blue collar equivalent of black barbershop talk... you have to belong to hear it & I've heard it with my own ears... plenty of it.
And they won't tell exit pollsters either... but it will be there.
As for why did he get nominated? Because a tiny minority of partisans select the candidates of both parties and neither of these groups are in touch with the larger population most of which are semi-partisan or non-partisan.
As for you voting against the Dems? Whatever - I could care less. Lots of people find reasons to support their partisan leanings - you have yours & others have theirs - fine, vote - its your right at least for now.
To choose McCain over Obama because you think Obama will mean inflation seems quite silly to me. The US needs a radical CHANGE of course and only Obama could bring that. Almost anything would be preferable to a continuation of the present policies. And that is what we would get with McCain, not to mention a not very bright guy who is a muddle head who campaigns by exploiting, as did Bush, ingrained American stupidity. I agree that the mere fact that Obama got the Democrat nomination hardly means the US heartland isn't racist. It is; it just pretends it isn't.
the good news is that the potato chip suit in california is now settled. California law requires very strict labeling. check it out. You may eat more potato chips now.
Damn, I didn't even finish my breakfast beer, then this. Some of you have been very naughty indeed.
Cheers,
Who is John Galt?
WTF?
Now, I'm picturing Mozilo wearing a potato chip suit.
Hash browns (bacon and potatoes).
Thanks.
Petey Wheatstraw,
"Now, I'm picturing Mozilo wearing a potato chip suit.
Hash browns (bacon and potatoes)."
BWAHAHAHAAHHAAHAHHA!
You did a Dan Quail! And I'll have some bacon please. Damn, I'm hungry.
Cheers,
Is there any intelligent life out there at all?
This is a perfect example of why I come to CR: nice balance between "candy-coated" MSM reporting and incessant negativity. Your audience wants to educate themselves, not take part in the senseless beating of dead horses.
Can I stay off topic if I there is no topic?
Going to be a foggy day for sure.
Anonymous | 08.03.08 - 10:40 am |,
Nope, not as far as I can tell.
Just how bad did you folks get, last night?
I checked out after the synthetic CDO discussion.... which came after the details of squirrel stew, I think.
Does anybody really know what time it is? Does anybody really care (about time)?
Ok I guess I'll be the first on topic comment.
Extending foreclosure time lines is merely providing more free rent to those being foreclosed upon. This should help them move on, provided they save the money and don't piss it away.
OT but Tanta has a nice post on foreclosure timelines.
Chicago,
Good pull:
YouTube - Chicago - Does Anybody Really Know What Time It Is?
Cheers,
Liz,
I realize banks are not being agressive collecting seconds (HELOCs, etc.). I just don't know why that is. Why don't they hire Vinny's Collections the way the credit cards do? A friend of my sister passed away just after college from cancer. A collection company found her parents and started harrassing them, telling them they'd lose their house, blah, blah.
Banks have absolutely no morals and there are loads of unethical people out there who will take the work. Is there a law that prevents them from assigning the debt or sub-contracting the collection process? ...or, is this a special case of blood from a stone due to the magnitude of the financial failure??
Thanks,
Children have lost touch with the natural world and are unable to identify common animals and plants, according to a survey.
Half of youngsters aged nine to 11 were unable to identify a daddy-long-legs, oak tree, blue tit or bluebell, in the poll by BBC Wildlife Magazine. The study also found that playing in the countryside was children's least popular way of spending their spare time, and that they would rather see friends or play on their computer than go for a walk or play outdoors.
Attenborough alarmed as children are left flummoxed by test on the natural world -
Nature, Environment - The Independent
Kind of like a lot of adults not knowing the difference between an assert and a liability.
More on last nights CDS discussion:
YouTube - Credit Default Swaps - the next crisis?pt1
hey don't bogart
You mean, someone in the previous thread actually went off topic?. I can see the problem. That sort of thing can upset and disorient the massive worldwide
130-person readership of this blog at this hour.
Oooh, great an OT thread!
Now I can comment on the banner ad gracing CR the last coupla days. Th one for "the most intense novel of the year" - "The Gargoyle" by Andrew Davidson.
Am I the only one who saw that and thought..."Is that the same Andrew Davidson?"
It's not.
Be sure to watch both videos
Banking losses from across the pond:
From The Sunday Times
August 3, 2008
Royal Bank of Scotland poised for biggest loss in UK banking history
Britain's second largest bank expected to reveal it has lost £1 billion in first half
Royal Bank of Scotland poised for biggest loss in UK banking history - Times Online
Yah, WTF? I agree?
banner ad gracing CR the last coupla days.
I'm against the porn links as well, what is going on?
Has anyone actually used the word "ennui" in their casual conversation? Seriously...
The Worlds Grandest Ponzi Scheme Unravels (Mish's old buddy Mike Morgan Update)
Blogger: Blog not found
These ennui-laden open thread conversations are seriously boring.
"We are not only headed for a Depression, but a violent Depression that will be far worse than 1929."
(Mike Morgan)
Is the U.S. Banking System Safe?
Is the U.S. Banking System Safe? -- Seeking Alpha
To avoid ennui I regularly drink heavily. But if that doesn't suit you, you can avoid ennui by gardening.
Or you could read Tanta's uber nerd posts.
Or you could build yourself a Super Colander Tin Foil Hat. Makes no difference to me.
Cheers,
"Housing Prices - Let me touch on this briefly. Prices are going to drop another 20-50% without a Depression. As we move into Depression, it will be an event we have never experienced at the scale we are entering..."
Dont read Mike Morgan if you are in a tall building.
Hey all,
I just had a chance to catch up on all of the comments posted re: CDS after I hit the sack.
MLM -
The auction mechanism bond guy gave some color on (and the concomitant inflated recovery values that can occur due to the notional amount of CDS far outnumbering actual cash bonds in case of default) is described - very well on Tradeable Credit Fixings
These are the guys that run the auction process.
Bond guy's assertion that cash bonds are 1) tough to short, and 2) even tougher to cover is 100% accurate. This is probably the major reason for the CDS space expanding so rapidly in the past couple of years. Instead of getting stuck with whatever size a broker-dealer/insurance company/hedge fund has in terms of cash bonds, its much easier to just buy protection from a willing seller. The implicit leverage of CDS is an additional bonus to the buyer of protection - unless you're paying points up front (like protection on GM, for example), a CDS transaction is far cheaper in terms of cash going out the door than financing the purchase of a cash bond. Additionally, you can tweak duration however much you'd like to when buying/selling CDS - 1,2,3,4,5,7,10 year protection is all available, whereas with a cash bond, you are stuck with the original maturity stipulated at the time of issuance.
If CDS were traded on an exchange, much like eurodollars, S&P futures, etc, all of the problems myself and other posters have pointed to would be moot - your only counterparty risk would be that of the exchange (instead of buyers and sellers of protection meeting each other, each side would meet the exchange, and it would be the exchange's responsibility to ensure that the market reaches equillibrium). Greater transparency, better information, lower transaction costs, etc would result.
When I say that I have lost confidence in the efficacy of the product I trade, I mean that in its current form. CDS, if rethought and reworked, actually makes perfect sense, both as a hedging and speculative tool. However, in its current form, the market is just too opaque & convoluted for it to be able to withstand any significant stress event. Just my two cents.
Cheers,
.
.
I just watched the "Powder the 44lb cat video" and was wondering how much longer before we see a video of a forclosed home owner abandoning their children when they move out.
Since we have already had the "suscide video" and the "abandoned cat video" I suspect it wouldn't be much longer.
.
.
Seattlesu
default,
Welcome to the swirl (to be interpreted as you will)...
What is your take on the efforts/discussion to try and convert the OTC CDS world into an exchange traded environemnt? Wishful thinking at this point or does that have any legs?
TIA
crispy,
"Dont read Mike Morgan if you are in a tall building."
YouTube -
Cheers,
Remember those granite countertops that everyone just had to have. Well, now the scare is rising that they may be radioactive. Most are not considered a problem by the EPA but some might have a bit more uranium in them than is normal.
If buying a house with granite countertops, now you might want a radiation/radon test on them before you close.
Granite kitchen countertops
LOL! I guess that guy decided he didnt want to wait for the Depression...maybe that was Jas?
Has anyone seen him lately?
Energyecon -
I think TPTB would eventually like for much of CDS world to move onto an exchange - and I'm in complete support. I think they've just been distracted a bit with all of the other shoes that have been dropping around the Street. Getting the major banks to get on board with an exchange is like herding cats - one of the largest areas of profit growth over the past few years at most banks has been CDS & other OTC derivatives (we can get into bespokes if you want) due to the fact that when I give a price for protection, I'm really only competing with 20-30 other entities liquid/creditworthy enough for folks to actually buy protection from. This lack of competition means...drumroll...fat profits.
So yeah, longer-term, its moving to an exchange-based model, but for now, we'll be limping along & collecting outrageous (when compared to liquid, competitive, efficient exchanges) bid/offer spreads.
Cheers,
Seattlesun,
Where I'm at (East TN), it has been the trend to build a horse farm. These micro ranchs are now coming on the market at ridiculous prices. I'd read where some people were abandoning their horses at their boarding stables. I expect soon well here about the bank showing up at a foreclosed property and discovering that they have also gotten a pony.
You born and bred American dupes:
"Debt by Jas Jain
\t
Debt in the US is the biggest bubble and the mother of all the other bubbles. In this regard, Doug Nolland's weekly Credit Bubble Bulletin, for the past several years, is the best chronicle of the process that is headed straight to Greater Depression. (BTW, Greater Depression is a term that I coined after comparing the imbalances in the US economy in recent years with those during 1925-1934; the term has been picked up by few people who were on my e-mail list during 1998-2000, including James Davidson who wrote a piece with the title of "Greater Depression")."
Born and bred dupes,
Cheers,
"one of the largest areas of profit growth over the past few years at most banks has been CDS & other OTC derivatives (we can get into bespokes if you want) due to the fact that when I give a price for protection, I'm really only competing with 20-30 other entities liquid/creditworthy enough for folks to actually buy protection from"
This reminds me of the analogy of two traders on an island, buying/selling the island to each other over and over again and book the profits each time...it becomes fantasy land after a few transactions...
I'm really only competing with 20-30 other entities liquid/creditworthy enough for folks to actually buy protection from"
Now I see,...it's a protection racket! Paging RICO,...
"energyecon writes:
What is your take on the efforts/discussion to try and convert the OTC CDS world into an exchange traded environemnt? Wishful thinking at this point or does that have any legs?"
My take is that central clearing may be the wave of the future, but that does not necessarily mean a futures exchange. I.e., there will be a clearing house, but it will clear customized transactions (within limits).
In the interest rate & volatility world, all that is needed for mark-to-market is a daily swap and volatility cube fixing. Any non-insane interest rate (and forex) product can be then priced off that grid. Everybody can mark to market daily their IR/FOREX derivatives (and thus adjust needed collateral) with the clearing house without needing standardized futures contracts.
This sort of standardization may be harder for the CDS market to develop, but I'm not certain either way.
Bitch, bitch, bitch...
I hate the fact that people have to come here to vent about stuff that isn't on topic, I mean, that is the point!
Why is John McCain running almost neck in neck with Obama? Racism vs. Obama? Or what? (I'm seriously perplexed since it would seem the public isn't bothered by the recession all around it (them)). Explanations sought.
default, bond guy:
Thanks for views from the front lines - any assessment of the prospects of successfully transitioning into that state of the world - before another Conjure Clock rings its chimes?
Default,
WTF are you doing here? You fell asleep last night and didn't tell me how the story is to end.WTF was that about?
Bond Guy -
I'd take that one step further - once clients & customers realize that they can isolate themselves from risk of their counterparty paying up on their obligations, and that it makes absolutely no sense for them to be paying fairly high transaction fees for standard transactions (i.e. 5 year protection, the most liquid), they will clamor for an exchange-traded, standardized product. Imagine how much easier that would be for mr. insurance company risk manager guy to deal with...
But that's still a few years off. For now, the "customized clearinghouse" you mention is probably where we go.
Cheers,
isn't it interesting, the parallels between CDS and oil futures and options trading.
in both cases the vast majority of trades are by speculators who don't own, build, produce or consume the underlying product.
regarding CDS... imagine being allowed to take out a life insurance policy on anybody on the face of the planet despite not having an "insurable interest"
i'm readding here and at other sites that "anybody" can participate on either side of the Credit default swap.
i have read that the notational value of oil futures and options trades has been up to 5 times the physical production and consumption of oil
the object of most traders is to liquidate the deal before physical delivery date arrives.
a house of mirrors and a house of cards
Misean - we're dopes, not dupes.
Hey- how's your glod doin'? I still think you really ought to cash out of that crap. Commodities are so last quarter.
First! Got, I love it when people do that.
And someday this war's gonna end....
Default
one of the last questions asked last night, after the sane had long since gone to sleep...
what do you see people, who are knowledgeable, doing to protect themselves, personally financially, from the possibility of CDS meltdow
jim,
The racism card is the only card left for the right wing Klan and as more people see this type of nazi mentality and the ol' fashioned hate being vented from Old Republicans, the greater the thrashing. This type of simplistic scare tactic is just another branch or arm from the people that spooked America into The Iraq War and The Patriot Act and the decay of The Constitution. I'm a white guy, but I understand the reality of a diversified America, which is not made up of just rich white people that thrive on greed and power -- there are boatloads of Italians, Asians, Mexicans, Indians and a global list of many people that do not need The Reagan/Bush/McCain Bullshit!
Shnaps,
Thanks for taking the lead - along those lines it's notional value, not notational value.
2 minutes for a cat with thyroid problems, just because it was loosely foreclosure related...erm
stupid question:
Why do RE ads look so much like ads for strippers? nothing but orange tans, superbright teeth and names like "Sage"?
Shnaps,
"Misean - we're dopes, not dupes."
Yeah I know...I'm not as articulate as JJ.
"Hey- how's your glod doin'? I still think you really ought to cash out of that crap. Commodities are so last quarter."
Well I bought the majority when gold was $250 ish and silver was like $3ish
so I'm pretty much OK.
Cheers,
I just wanna do it again. First! Feels so good. Fills the void in my life even.
otional not notational
check, thanks, im learning
God Bless Blythe (GBB)
.As Blythe Masters, global head of credit derivatives marketing at J.P. Morgan in New York points out: In bypassing barriers between different classes, maturities, rating categories,debt seniority levels and so on, credit derivatives are creating enormous opportunities to exploit and profit from associated discontinuities in the pricing of credit risk
o biggie, the error was started a few threads back - just wasn't motivated to jump in then - but the Shnapster broke the ice!
and we are all students here
Can we talk about fuzzy squirells again?
All these acronyisms is makin my head swim.
energy,
"and we are all students here"
Aw shit! I've been banned.
Cheers,
Default,
A simple question that has been dogging me: why haven't the CDS cross-defaults already occurred?
Its tempting to think of CDS-writing as the ultimate 2006/2007 hedge fund tool: rake in the premium, show no volatility in returns (clients gotta love that!), then go mansion-hunting in the Hamptons. Oh, and if it (housing) blows up, no worries! Its OPM, and you can probably shut down and open a new fund anyway.
So, I imagine a lot of CDS on ABS was written by hedge funds with very little supporting capital. If that's the case, CDS is similar to a severely undercapitalized Lloyds of London. Following the analogy of Lloyds, we just got hit with multiple, simultaneous CAT-5 hurricanes (in the form of six-sigma ABS losses).
So why is the under-reserved, undercapitalized "Lloyds of London" still standing?
mock turtle -
Its not as though anybody who trades CDS for a major broker-dealer actually owns any or has sold any protection, so a meltdown in CDS world would instead affect their lives by its second-order effects (layoffs, etc).
Beyond a certain point, most people on the Street receive their bonus compensation in company stock that vests on a 3-5 year schedule. The CDS/other derivatives traders that I know (who are probably a somewhat more skeptical bunch than most) have been hedging this "permalong financials" position that they have due to a large concentration of their net worth being tied up in company stock by 1) going long oil/other commodities in the past year, and 2) buying options on SKF, SRS, etc.
Hopefully that helps.
Cheers,
hope people caught the post by a person using the handle, if i remember correctly, tom joad? a texas RE-IBer
talked intelligently about problems in the Tx RE market...cracks just beginning to show and that many many banks in his state were not solvent in his opinion.
seeing defaults post last night reminded me
WSJ
Protect Yourself From Bank Failures
By SHELLY BANJO
August 3, 2008
Protect Yourself From Bank Failures - WSJ.com
Default, appreciate it
thankx
Hey Mr Default,
Can we go over some stuff about bilateral financial contracts? I'm curious about inter-party framework mechanics related to partnerships and entities as they relate to liquidity and obligations, i.e, the transfer of risk that is associated with this type of speculation and non-disclosure.
JSA
Don't be stealing my tagline.
Now you have to talk about when Ben's next helicopter drop is going to take place.
Everybody is now sure that inflation is not a problem and that there will be plenty of food.
Well, remember two years ago, safe as houses was heard throughout the CDO/CMO/ABS space.
Now we gather around to look at the smoking crater that modern finance has wrought.
For now, enjoy the pause that refreshes, for another blast downward shall come on the rollercoaster.
PS Friday I did 3 rollercoasters in 45 minutes at 6flagsogeorgia.
Vertigo.
Someday this war's gonna end...
It is way to early to talk about depression. Healthy recession that forces most of the business dinosaurs to die out and us experience some work related blues is very possible. Depression, when unemployment goes beyond 12 percent is not very likely at this point.
I ve got headache, let's be optimistic. (later prolongs life)
Re: Aw shit! I've been banned.
Where does that leave me?
.
.
Jim,
"there are boatloads of Italians, Asians, Mexicans, Indians and a global list of many people that do not need The Reagan/Bush/McCain Bullshit!"
Good to see you include Italians in the non-white group. Always suspected that was the case.
.
.
NY Times
Three Strikes Against Consumers
ECONOMIC VIEW; Three Strikes Against Consumers - NY Times
Default,
If I may presume to paraphrase:
"It's all about the trade."
And the old joke punchline on the Street:
"Them's tradin' sardines not eatin' sardines."
Did I leave anything unsaid with those two lines about the CDS market?
Tom Joad
It was 8-31-08 at 4:37 pm according to my notes.
I'll try to find the link.
You got part of that wrong. He is an attorney for some big IBs not a banker himself.
@Mock,
Texas RE is just fine, thank you.
We're all holding on by a thread waiting for some gaseous shale to be dicovered under our doublewides.
Actually, my people (the Irish) once fit that group as well. It wasn't until the Italians started pouring in that the Irish became "white".
Xenophobia and racism is all they've got left. And barely will owe $50 to the tip jar after Obama trounces McBush.
David Pearson -
The cross-defaults have not yet occurred due to the existence of a mysterious character who I referred to on last night's thread: Mr. Screaming Risk Guy Whose Only Exposure To Anything Approaching Sunlight Is That Of His Liquid Crystal Display.
His job is to investigate the ability of hedge fund/other non-broker-dealers' ability to pay. Additionally, there really haven't been very many defaults yet. However, I suspect that this party is only just getting started...
Cheers,
I have an anit-Mexican racist Irish friend. He was printing up "Go Home Meixican's" stickers to put around parts of NYC... Yes - he's an idiot.
I went to an antique shop and bought him a "No Irish Allowed" sign that used to hang in pubs around NYC.... How quickly they forget.
After the GD, came WW2.
After the next event....
YouTube - Whitest Kids - Hitler Rap
Default -
Does Screaming Risk Guy (that would make a nice handle, BTW) keep up with what the counterparty does after the fact? i.e. anything to keep those zit-faced hedgies from writing more protection to someone else a month later and Risk Guy is none the wiser?
Trapped Inside Kona -
You'd probably have to talk with a middle-office/risk management/legal person to get answers to the questions your asking. Most traders of CDS (at least at the broker-dealer level) aren't even remotely concerned with their counterparty risk - Mr. Screaming Risk Guy comes by, yells at them to DK the trade they just did with XYZ hedge fund for whatever reason, and the trader gets on the phone and has an awkward conversation. That's really it.
As far as the mechanics of CDS trades, there are pre-existing, standard contracts used (concerning the definition of the reference entity, what qualifies as a credit event, whether the contract is "modified restructuring" or "no restructuring", etc) and really all you can do as a line trader is:
1) Indicate your bid/offer
2) Indicate the size at which you are willing to execute
3) Indicate the duration of protection
Hopefully this helps.
Cheers,
Ross
appologies
i hear you
and i have no personal knowledge about Texas RE...
Tom Joad sounded credible
as i point out from time to time (due for a repeat) i'm probably the dumbest guy in the room on the subjects of econ and finance.
learning here as a matter of survival
i'm a retired juvenile corrections staff, worked the front lines...i can share a lot of info about gangs, drugs and teen violence, but then that's way O OT!
MLM -
This is a very good question. My hope is that Mr. Screaming Risk Guy works overtime, and that his tolerance for Vitamin D deficiency is abnormally high.
In all seriousness, I really don't know any more than I've already let on - and this is probably one of the more fundamental weaknesses within the broker-dealer model. "Risk guys" are never given the time of day to explain what they do/how they do it. They need to be better integrated into the operation...
Cheers,
London Times
Where have all the real men gone?
Top American columnist Kathleen Parker is causing a furore with her new book Save the Males, in which she argues that feminism has neutered men and deprived them of their noble, protective role in society
http://entertainment.timesonline.co.uk/tol/arts_and_entertainment/books/book_extracts/article4448371.ece
Amazon: Save the Males: Why Men Matter Why Women Should Care
Amazon.com: Save the Males: Why Men Matter Why Women Should Care (9781400065790): Kathleen Parker: Books
Nothing but another transfer of wealth from productive citizens to the useless serial defaulting welfare establishment. This time it's free rent.
Allowing the minority extortionists to prevail is like negotiating with terrorists.
Is this the pot smoking thread or the squirrel eating thread? I'm lost.
Did you know that prostitutes are about 250% more expensive in Costa Rica when compared to a similar girl in Bangkok? Did you know that Cambodian girls are even cheaper, though of lesser quality? Well now you do. 'Global whore prices' seems like good info for an OT thread.
For those in SoCal, La Zona Roja in Tijuana is a no-go. Total ripoff for inferior goods.
Ross
too bigtofail post above was from me mock turtle
was about to answer toobigtofail about tom joad and wrote his or her name in the name section cause i had twee bloody marys for breakdfast
Currently Smoking Cannabis -
I can't tell you how many times reading your posts at work have resulted in an eruption of hysterical laughter, followed immediately by a catastrophic coffee burst across my bloomberg keyboard. Seriously, you're awesome.
Cheers,
Have you guys seen the "Cat Adoption Due to Foreclosure" video at the end of the previous post?
It's ridiculous from now on every negative event in the media is linked to "epidemic" of foreclosures.
As if couple of years ago there weren't several millions pets put to sleep every year.
@Mock,
Twee bloody marys?
Is that better than tree martulies?
GM is dead. Dead as in AMC dead. Dead as in dealerships turning into discount furniture and carpet outlets. Dead as in very soon.
Sure, some of you will say "so what!" You are ignorant. When GM dies it will resonate in the minds of J6P's everywhere as if the bell from Hell tolled just for them.
GM dying is like Thanksgiving becoming a day of Muslim reflection. Unthinkable. J6P will know then, the world has left them behind.
Default,
Appreciate your response, it is Management Agreements that ended up getting Enron in some trouble, and obviously traders have obligations to carry out strategies. My concern is that the traders are essentially tossing chips into a game where money has no reference and this casino mentality, the casino mechanics allow fraudulent contractual collusion to occur. Nothing has changed since Enron and the false and misleading abuse of indemnification obligations, i.e, there is no transfer of risk other than someone like you flipping casino chips in a game that is out of control!
Re: The definitions of a Credit Event, the relevant Obligations and the settlementmechanism used to determine the Contingent Payment are flexible and determined bynegotiation between the counterparties at the inception of the transaction.
This game is made up on the fly and as it grows larger without rules, anything goes and the bets can escalate as we play break the banks!
CSC,
"Did you know that prostitutes are about 250% more expensive in Costa Rica when compared to a similar girl in Bangkok? Did you know that Cambodian girls are even cheaper, though of lesser quality"
Please define "quality".
old trader
It's 107 degrees here today. I'm touring this million dollar place at 1. May jump in the pool...
6532 Westgate Drive
Dallas, TX
$1,195,000
Search Results - Dallas Real Estate
Sorry if this is OT, but I would like to discuss the previous thread...
...couldn't help myself
Ross
trying to justify "a bit of the hair of the dog that bit me" treatment for a small hang-over
last night was fun...had a better time than i can remember
now adding tomato juice to a shooter to fool myself into thinking this is right.
"MLM writes:
Does Screaming Risk Guy (that would make a nice handle, BTW) keep up with what the counterparty does after the fact? i.e. anything to keep those zit-faced hedgies from writing more protection to someone else a month later and Risk Guy is none the wiser?"
My guess is that they will increase the needed collateral to support trades.
In the first "correlation blowup" (when Ford & GM went to junk) the story I heard was that the investment banks threw out what I think they called "Texas Hedges".
They shorted any liquid risk asset they could, on the hope that they would blow up at the same time as their hedge fund counterparties.
No idea what Texas had to do with that.
Default,
Yes, but...
...but Mr. Screaming Risk Guy wasn't around in '06 and early '07, or at least he was locked in a broom closet. Right?
...but even if there have been few "defaults", there has been mark-to-market for hedge funds, and the margin calls following those marks would have wiped them out. We should have seen the HF's positions wind up on their CDS dealer's books (Lehman, JPM?) as a marked-to-market position coupled with a loss from margin lending.
One can only conclude that either: 1) they're really fudging the marks (even now?); or 2) undercapitalized hedge funds were not big writers of CDS.
The Contingent Payment can be effected by a cash settlement mechanism designed to mirror the loss incurred by creditors of the Reference Entity following a Credit Event. This payment is calculated as the fall in price of the Reference Obligation below par at some pre-designated point in time after the Credit Event. Typically, the price change will be determined through the Calculation Agent by reference to a poll of price quotations obtained from dealers for the Reference Obligation on the valuation date. Since most debt obligations become due and payable in the event of default, plain vanilla loansand bonds will trade at the same dollar price following a default, reflecting the markets estimate of recovery value, irrespective of maturity or coupon. Alternatively, counterparties can fix the Contingent Payment as a predetermined sum, known as a binary settlement.
http://www.investinginbonds.com/assets/files/Intro_to_Credit_Derivatives.pdf
I need a donut!
oldtrader: Prostitution is a skill like any other profession. A good prostitute is friendly, confident, and makes her client feel as though they have an actual ongoing relationship. She carries conversation well, even if her client speaks a different native language. She reads body language, and moves the client into his comfort zone with ease. She is aggressive when desired, submissive when demanded, and always in control of the interaction, even when it appears otherwise.
Appearance is a subjective thing, and high-dollar working girls are not always talented working girls. Take the Russians, for example. They are some of the most beautiful working girls on the planet, but their style of service is on par with Big City American working girls.... about a 6 out of 10.
Thai ladies will make you feel like you've known them for years, take little money, and will seem to read your mind. They know men. Cambodian girls try hard, but lack the experience with Westerners to be able to pull off the act in a convincing way.
I hope this has been helpful.
Some of us old codgers remember when the stock of a company was considered a derivitive.
Going public was considered a sign of weakness or greed.
What we have now is nothing more than a casino. I'm fine with that but I hope they don't punish us card counters.
Currently Smoking Cannabis,
I'm thinking, weed stuffed squirrel and hash brownies?
David Pearson -
Mr. Screaming Risk Guy has always been free to roam and vociferously object to any and all trades. Its just that nobody started listening to him until August 07...
Cheers,
A pessimistic Rubin:
"I think that the current difficulties, the current duress, I think the most likely scenario with respect to all of that is that it will likely continue for quite some period of time, could get a little bit worse," Rubin said.
"There's always some chance that matters could get better more rapidly but I think that's very low probability," he said. "And there's some chance, and hopefully it's a low probability, that things could get considerably worse."
- NY Times
B E S T Video of the day (or your money back):
YouTube - GI Joe - Pork Chop Sandwiches
B E S T Video of the week (no refunds):
YouTube - "High as F#%k" Music Video
The acrynm of 'for unlawful carnal knowledge' has come a far piece.
Why do I think that teen delinquents and prostitution are not off track when talking about Wall Street? Hmmmm,...
CSC- did you catch the timeline on the last post? Apparently if you time it right you can stop paying and live rent free for a long while,...but you'd better have you're strategy mapped out ahead of time.
"And there's some chance, and hopefully it's a low probability, that things could get considerably worse."
Conjure Bag says, "Hope is not a plan."
sdtfs: Dude, THANK YOU for the heads up. I'll go check it. The Mrs. and I have a plan for the future and are seriously watching the feasibility of walking away. If the free rent time is long enough, we will turn into deadbeats. It's still surreal entertaining thoughts of just refusing to pay when we can... but times are whacky.
Currently Smoking Cannabis wrote
Prostitution is a skill like any other profession. A good prostitute is friendly, confident, and makes her client feel as though they have an actual ongoing relationship
CSC
when i was about 20 years old i was in a bar with several hippie friends and friends of friends listening to a band and drinking beer.
one of the girlfriends of a friend of a friend shared with me that she was a "working girl"...this while her 'boyfriend and others were on the dance floor...although one other couple was still seated at the table with us.
i announced proudly that i never had need of such services and even if i did it just was something i wouldn't do.
she asked me to show her my hand...from across the table, i thought she was going to read my palm or something
( she was very particular that it had to be my right hand)
she then proceeded to talk dirty to me and draw a line in and out and around my right hand
when she was done i said i was convinced and would be willing to pay for her services.
she said "maybe some other time, and smiled"...i got her point.
This has been bugging me for quite some time.
Why were popcorn ceilings so popular in the 70's?
Screaming Risk Guy,
Years ago, before Credit Default Swaps, I was a Screaming Risk Guy. In those days we looked at counterparty risk accross the organization. This would include unsecured loans, interest rate swaps, commitments, and any other exposure with a counterparty. The measure of counterparty risk at that time was updated daily, and there were daily limits on traders to control the intraday risk. Of course, traders hated us, and complained endlessly about needless controls put in place by mindless idiots. Like any part of banking there is an oscillation between too much control and not enough. We all know where we are now.
This CDS stuff, this derivative shit, the abuse of taxpayers by this corrupt Federal mafis gets back to this >>> FRAUD>>>> Money laundering is the practice of engaging in financial transactions in order to conceal the identity, source, and/or destination of money, and is a main operation of the underground economy.
In the past, the term "money laundering" was applied only to financial transactions related to organized crime. Today its definition is often expanded by government regulators (such as the United States Office of the Comptroller of the Currency) to encompass any financial transaction which generates an asset or a value as the result of an illegal act, which may involve actions such as tax evasion or false accounting.
Is the Bush Coup selling drugs like Reagan and The Contras???
"I suspect we will see more of this given that housing has in fact bottomed as evidenced by the 3mo rate of change in Case Sciller and New Home Sales which have both turned positive."
So housing has bottomed because the drop is slowing down? The latest Case Shiller numbers in no way pointed to a bottom in resale.
And New Home Sales at foreclosure prices have turned positive is somehow a positive? Here's a hint when one or more major public home-builders goes BK that will be an indication that we can start working off some of the excess.
We've just finished the sub-prime write-downs and haven't even hit the alt-a, prime, credit card, auto, commercial write-downs and you're already calling for a V-shaped recovery.
Let me know what you're buying so I can short it please.
On topic -
Anyone remember when a market was as tightly range bound as the QQQQ has been for 5+ weeks? It's been impossible for a "position trader" like myself to stay short, as day-to-day and intra-day it's down by 2% and swings back up.
Because of where the untested price/volume is concentrated (at the July 15 lows - just like the other markets), I expect this to resolve downtown, perhaps after a bit more consolidation, but I think Tech (and Financials) will lead the next wave down in equities as it did from the top in Oct 07.
So QID looks good (or short QLD) for a position/intermediate trade.
Well Tanta I did not exactly "freak out", And even after reading your reply, I am still sure that this will not help Freddie one bit.
You are correct that I misread the statement on housing wire and while your rant
It says that the total allowable (which word does not rhyme with "required") timeline is 300 days in total from last payment made to FC sale. is true, I never said or even implied "required". You make it seem as if I did.
Because of the risk to the servicer, if I put myself in the servicer's shoes I would consider dumping these loans as fast as I could. Of course the servicer is going to do what it can to minimize its losses or maximize its profits under the new guidelines, regardless of what Freddie thinks it may be accomplishing.
And if what you suggest is true that this is only an increase of 30 days from 270 to 300, by the time it gets to 270 days I would suggest the loan is a lost cause. So even if it is just another month that is still another month of freeloading. And on the off chance that you are wrong and it is really a 60-90 day extension not 30), then it is another 2-3 months of freeloading.
I do not think that will do Freddie any good, and I certainly doubt that a second (third), workout will do Freddie any good.
That moves smacks of desperation IMO,and it is also a way to pretend these loans are current, understating the nature and extent of the problems.
Freddie is desperate IMO, willing to try damn near anything, is how I read the situation.
It will not work because unemployment is poised to soar, and the housing bottom is likely years away.
Finally, I admit that I do not like Fannie and Freddie for the simple reaon that neither should be in existence.
I said they were a moral hazard and I was right and I said they wold cause a huge taxpayer bailout and I was right (one is coming).
I resent having to bail out these institutions and the boldholders like Bill Gross who bet on it.
Mish
Wall Street Is an underground economy with no regulation. There are no audits or accounting that honestly describe the nature of the fraud that goes on within this pirate/mafia casino -- BUT, taxpayers need to bail out all the bad bets made by traders that are acting under the authority of someone else, who is connected to a chain of illusions and threads that all end up in The White House, where lobby groups sleep beside crooks that steal Americans blind! Isn't it nice to have a guy like Paulson act as a puppet for SIFMA and write new laws?
Why were popcorn ceilings so popular in the 70's?
Why did a lot of things happen the way did in the 70s? They were (and still may be) sold as "Hollywood Ceilings." (Some popcorn ceilings has glitter mixed in.)
The 70s saw real growth and innovation (reliability) in small power tools. For a long time Makita built market share and eventually whipped other brands such as Rockwell, Ingersall-Rand, and others by launching the cordless revolution, but that's another subject.
Another factor may be that spraying a ceiling was appreciably faster than rolling it, reducing labor costs - despite the time to set up and clean up. Still another might have been that defects in the ceilings were considerably easier to fix, or ignore, making the overall job of painting more economical.
Tanta seems to have given permission for comments OT. I have been doing yard work all day and have been burning over an ad in the morning paper from the local realtors association. I need to vent and this seems like as good a place as any. I swear that they, the Realtors, ran an ad assuring people that real estate values will continue to double every ten years. That is how we got to where we are. People quit buying shelter and started looking at residential real estate as a get rich quick scheme. Have the Realtors no shame? Go back to selling shelter. Not as much money but you can look yourself in the mirror in the morning.
More great sunday video pleasure:
YouTube - GI Joe Ice
othingburger, no sauce, no pickles
This one is for Tanta:
YouTube - GI Joe PSA - Reggae
Default - a question (request for a confirmation, really):
Several people have asked here how hedge funds and everyone else find counterparts for their CDS trades. My understanding is that most hedge funds trade with their primary broker, who then enter into a matching trade with someone else.
So, in the case of, say, a Company hedging a direct risk and contracting with a hedge fund at WSBD (wall st broker-dealer), both the hedge fund and the company will transact through WBSD - with two matching trades. The interesting thing about this being that instead of $10 mln in notional outstanding, we now have $20 mln in notional outstanding.
And likewise, if two hedge funds transact, each using their own WSBD, we now have $30 mln in notionals outstanding.
And then, if the next month each of the hedge funds decides to hedge the previous month's position using the same WSBDs (and for some reason it's not practical to cancel the previous trades), we end up with $60 mln in notional outstanding. Even though, in theory, all of these positions offset each other.
Of course, in reality it's even bigger numbers and a greater number of counterparts, and - in reality - many of the notional offsets and matching trades do not match perfectly in size/duration/basis etc.
I bring this up because of the usual confusion about how there could be $60 trillion (or whatever today's number is) of these things outstanding, when the process of actively trading pretty much requires that the notionals outstanding grow exponentially.
It's like every time we needed to trade a share in a company, we needed to make two new ones: and then never got around to cancelling the offsetting ones at the end of the trading day, just had everyone keep their own running tally of who owes what (like kids trading favours).
Unfortunately, I also agree with your analysis that even if 99% of all this stuff cancels out - in theory - the process of getting there could be long and freeze markets for longer than anyone thinks possibly.
And, final thought, the problem with hedging is that even when it all works mathematically, the formulae give you jack shit when you can't realize your hedge on the market. Resulting in terrible losses as all the hedges which are needed to back the other side of the "arbitrage du jour" fail, and the margin calls can't be made on the other side of the trade.
Hey, China is in the same boat as America and most of the "free" world:
Where art thou, China bond?
Where art thou, China bond? - Markets & Regulation - AsianInvestor.net - The network for Asian investment management in Asia Pacific - The network for Asian investment management in Asia Pacific
Transparency and disclosure still need improvement. Chinas young credit-rating agencies are not considered reliable, so bond prices may not reflect market expectations of a companys ability to pay. Many investors still avoid corporate bonds, believing they are not being adequately compensated for the risk of default, because they cant calculate it.
There are currently five domestic rating agencies: China Chengxin International Credit Rating (CCXI), China Lianhe, Dagong Global Credit Rating, Shanghai Far East Credit Rating and Shanghai Brilliance. They are all working with the CSRC to devise better models. In the meantime, Standard & Poors and Moodys Investor Service have local JVs with Citic Securities and CCXI, respectively but its still not clear what they will be allowed to do.
Mish,
Since Tanta has stepped away from the trading desk, I'll reply:
Re: (which word does not rhyme with "required")
ired\tadmired\taspired\tattired\tbackfired\tbemired
conspired\tdesired\tenquired\texpired\tfired\thardwired
hired\tinspired\tmired\tmisfired\tperspired\trefired
rehired\trequired\tretired\trewired\tsired\tsquired
tired\ttranspired\tumpired\twired
And if what you suggest is true that this is only an increase of 30 days from 270 to 300, by the time it gets to 270 days I would suggest the loan is a lost cause.
It would help if you commented on the thread under this one, Mish.
You still aren't getting it, though. By the time the loan gets to 270-300 days, THE FC IS COMPLETED AND IT IS ALL OVER.
You still want to read this as 270-300 days until FC is STARTED.
It is no more than 150 days from last payment made until FC is started.
It is no more than 150 days after FC is started that it is completed.
The amount of time it takes to complete a foreclosure is mostly a matter of state law. Freddie is saying that servicers can take 30-60 days longer than the bare minimum required by state law to complete a foreclosure.
But even if servicers take only as long as the law requires them to take, realistically FCs are going to take around 120 days from start to completion, because that is the average time required by state law to get through the legal process.
Unless you want servicers to start FC the minute a borrower's payment is one day late--and I assume you wouldn't advocate anything that dumb--then FCs will take at barest minimum 210 days (90 days to get to FC start, 120 days to get from there to completion). It doesn't make jack difference what some servicer might want or not want. The law is the law.
If you think states that have a due process of law for foreclosure of 120 days or more are "encouraging freeloading," then take it up with the state legislatures. The rest of us libertarians will be glad that the law makes it a touch difficult for private parties to take people's property away using the coercive force of the state.
Calls on SKF and SRS? Why? SKF and SRS are good for short term plays and thats about it. Makes way more sense to get puts on URE and UYG. Volatility degrades both the double longs AND double shorts.
Consider the following 1 yr returns:
IYR (x1 long US Dow RE Index): -12.9%
URE (x2 long US Dow RE Index): -32.5%
SRS (x2 short US Dow RE Index): -13.9%
IYF (x1 long US Dow FI Index): -31.9%
UYG (x2 long US Dow FI Index): -59.9%
SKF (x2 long US Dow FI Index): +40.0%
Over the past year it would have been better to be in IYR than URE despite the index going down. It would have been better to have puts on URE. If you have held SRS this year you got screwed.
Similar story in the financials although they are at least in the right direction. Again, it would have been better to have puts on UYG.
Tanta, Mish,
This is OT here, get out! WTF is going on, go back to your own thread!!
Oops, meant it would have been better to be in IYR than SRS.
Mmmmm, mmmmm, deep fried batter dipped squirrel for breakfast,...it don't get better than that.
Anybody know anything good/bad/whatever about GE Funds(Mainly GE Fund's Money Market) and GE's Interest Plus Money Market? Rumors welcome unless you make them up on the spot.
sdfts,
LOL! Yeah, chicken fried squirrel steak!
GE Retiree: GO to the website and read it is the best way for you decide.
From the site:
The Fund invests primarily in short-term, U.S. dollar denominated money market instruments. The Fund's investments may include U.S. Government securities, repurchase agreements, commercial paper, certificates of deposit, variable rate securities, asset-backed securities, foreign debt securities, Eurodollar deposits and domestic and foreign bank deposits.
The Fund invests consistent with regulatory standards governing security quality, maturity and portfolio diversification. For example, the portfolio manager limits investments to high quality securities with remaining maturities of up to 13 months and limits the weighted average maturity of the Fund's portfolio to 90 days or less. The Fund may invest more than 25% of its total assets in the domestic banking industry.
All of the Fund's assets must be rated in the two highest short-term rating categories (or their unrated equivalents), and at least 95% of its assets must be rated in the highest rating category (or its unrated equivalent), by a nationally recognized statistical rating organization. Additional information about the money market instruments in which the Fund may invest, including rating categories, is contained in the Statement of Additional Information.
GE Funds | Mutual Funds | GE Funds | GE Money Market Fund
If you have been a reader of this site, you will be able to answer the question.
Lest anyone try to make me feel stupid -- which I'm sure no one would want to -- Alan Greenspan had this to say about today's "complex hybrid financial products" ..."in many cases, seemingly challenge human understanding."
So, my human understanding of CDSs is challenged. Okay, there is a "buyer" of a contract that bets some company will default on its obligations. There is a "seller" of that contract which bets that the company won't default on its obligations.
Then, there is the company that may or not default. Am I right so far? The "buyer" gets an insurance policy so he won't lose on his bet. Does he buy that insurance policy from Ambac or MBIA?
"Greg writes:
Default - a question (request for a confirmation, really):
Several people have asked here how hedge funds and everyone else find counterparts for their CDS trades. My understanding is that most hedge funds trade with their primary broker, who then enter into a matching trade with someone else."
I'm only guessing, but I think pretty well any hedge fund would be set up to trade with a number of brokers. Having only a single counterparty would be suicidal, as they could blow you out of the water on margin calls any time they want. They need to set up agreements for trading with each one; not sure how they handle the back office side.
The brokers will generally not mechanically match trades, rather they will absorb the position in their book, and then only hedge the book exposures if they get out of line. The only time they mechanically match trades is if there is no liquidity in whatever is being traded.
great stuff from default and bond guy here. thank you, gents, for sharing your experience and knowledge with us!
what scares me more than anything are not the first order effects...paper is evaporated and money pushed around the table back and forth with some trailing zeros that, ultimately, don't mean much, but the net of that. liquidity is just gone and the credit markets are about three millimeters away from seizing up totally. this is what's going to kill the economy.
take the case of GM. they stop leases, can't give as favorable financing terms and people have to take out 6 years loans on a car. say what you will about GM's management, lack of vision, quality and all that, but it isn't fatal. this is a fatal infection that, if it goes on for long, will systemically kill the patient.
Default - It occurs to me that since CDSes are over the counter trades, Screaming Risk Guy has no idea how many CDSes the counterparty has already sold on the same RE to other parties or many other parties. What am I missing?
also i might add that the capital markets for most businesses are a mess right now. if you don't draw down your lines before they cut them, you're screwed. you're screwed on all debt positioning too. so the only avenue is, right now, equity raises and those are terrible for your WACC with debt cost high.
perversely, if you're a start-up that is doing decent you're sitting pretty right now because it will be cheaper and more effective to keep you going by capital injection right now. lots of start-up are getting lifelines where, if the markets were more functional, they'd be getting unplugged.
Bond guy -
Thanks. I was oversimplifying, of course, and should have made that explicit. Funds will of course transact through several counterparties, not just one.
My point is that the hedge funds (for example) will primarily trade through broker-dealers, not directly with "others." In fact, just about everyone will mostly trade through broker-dealers.
The same point holds regarding the broker-dealers holding the positions and offsetting their position separately (it's not actually simultaneous), but the effect is the same as in my description (even if the market is liquid, they're taking the trade at that point because they know the price).
Let me give you a slightly different scenario: party A (conservative boring company) wants to lay off some risk, the underlying instrument has no liquid market (for example, because it has a bunch of strange features, even though there are comparables). Hedge Fund B wants to take that risk on, and at a reasonable price, but Party A won't/can't transact with the hedge fund directly. But the friendly broker-dealer is willing to interpose with perfectly matching contracts...intermediating a transaction that would not have otherwise worked. Again, twice the notional exposure due to the intermediary.
Former Treasury Sec. Rubin sees more uncertainty
Rubin, now chairman of the executive committee at Citigroup, said Obama's policies could help return the country to the rosier economic times of the Clinton administration when the federal government had budget surpluses.
"We started the decade with surpluses and we had good federal revenues," Rubin said. "But instead, because of the fiscal policies put in place, we had deficits through all this period.
"What Senator Obama has said is that he is committed to restoring sound long-term fiscal conditions," Rubin said. "I think that's essential if we're going to have a good and strong economy. He said he'll pay for everything he's going to do with respect to Social Security and Medicare."
Former Treasury Sec. Rubin sees more uncertainty
| Reuters
That is going to be interesting to watch, these clowns are so full of crap their diapers are overflowing onto the floor.
Default writes:
David Pearson -
Mr. Screaming Risk Guy has always been free to roam and vociferously object to any and all trades. Its just that nobody started listening to him until August 07...
When the lawsuits start to fly, Mr. SRG who was supposed to sit down with Mr. Compliance Officer and go through the printed trade runs for the day, will have a problem. Law suits always name Mr. Compliance Officer as a party-- and Mr. Compliance Officer usually has Mr. SRG's initials on 'every' trade. It's called CYOA. If it gets really bad, it' also called Rogue Trader.
"At The Movies writes:
This has been bugging me for quite some time.
Why were popcorn ceilings so popular in the 70's?"
Can't say if this is cause or effect, but when I was renovating homes at that time I had difficulty in finding skilled craftsmen that could do a smooth ceiling. Workers in those days in NE were mostly caucasion. Problem was solved with the influx of large numbers of Caribian and Mexican plasters that had that skill.
My bro is a screaming risk guy... and yeah he is happy now because he says people are actually listening to him.
Econbrowser: Oil prices, autos, and the U.S. economy
Oil prices, autos, and the U.S. economy
It's instructive to compare what's currently happening to the auto sector and the U.S. economy with what we saw in the wake of the 1990 oil shock.
Sales of light trucks manufactured in North America, which category includes the once almighty SUV, remain deeply depressed, with July sales down 26% compared with last year.
GDP Report is Good News; Deflator Critics are Wrong
Economics and...: GDP Report is Good News; Deflator Critics are Wrong
Some people (mentioned here, for example) are denigrating the GDP report, which appears to show a 1.9% rate of real growth, on the grounds that the deflator used to convert from nominal GDP to real GDP is artificially low because it doesnt include imports (which have become more expensive, due primarily to changes in the price of one dark, viscous liquid that is included in their number).
I just dropped in to see what condition my condition was in.
I don't know why they don't enforce 2nds, but so it is.
I also don't know why they don't file for efficiency judgments, but they don't.
I don't know why people don't settle, when offered a reasonable settlement, but often, they don't.
I also hate popcorn ceilings, which I
am afflicted with in this house. My old house had 'em and after destruction by hurricane Andrew, was replaced by something very nice called "knock-down".
Last nite's thread was a classic, wasn't it.
Extreme erudition and nerdiness mixed with extreme hilarity. Somebody ought to print it and send it to various MSM people, just to show them why we are posting here, instead of watching tv (or Shakespeare).
That thread is a high point of our civilization. I mean it.
The average iq of the participants must be staggering. And I'll bet that Misean dragged a 7th brain cell into the fray, no matter what he says.
The average iq of the participants must be staggering.
You should see our junk
Lawyerliz writes:
"That thread is a high point of our civilization. I mean it."
And that was because of Currently S C, or does squirrel meat have side effects?
"My bro is a screaming risk guy... and yeah he is happy now because he says people are actually listening to him."
Time to close the barn door.
Ok. If there is a RAPTURE and I standing next to the person who gets raised up to heaven. What happens if I grab there feet and go up with them?
Does glod flick me off like a booger? If the RAPTURite kicks me in the head so I fall to the ground. Do they fall with me for being a meanie?
Wow, I killed a thread!
That's because you were so freaking funny we're all trying to catch our breath. Does glod flick me off like a booger???? Not the last time you'll see that question.
Ok, somebody pays some money for all those hedges. Where does that money go besides commissions? Does it purchase something valuable, an acrea of farm land, a lump of glod, a jug or whine, a loaf. Does it get invested in mtg backed securities? Is there any there there upon default?
Re: "Does squirrel meat have side effects?
I think that will be debated later tonight, as many (here) are currently digesting some of the recipes
Popcorn ceilings are like the Fed. They cover a multitude of sins. Who wants to look at sins every day?
Things could get ugly,'' said Jonathan Ravelas, a strategist at Manila-based Banco de Oro Unibank Inc., which manages about $5.9 billion in assets.We could see more downside from here as corporate earnings are released.''
The MSCI Asia Pacific Index dropped 1.8 percent to 130.63. Japan's Nikkei 225 Stock Average lost 1.8 percent. Most benchmark indexes across the region declined.
I asked earlier what could explain why McCain is running almost neck and neck with Obama. I posited possible racism. But then I remembered H L Mencken. Remember him? He was the person who demonstrated his eternal insight into Americans with the remark that "one can never underestimate the intelligence of the American public." Truer words have never been spoken. Recent proof is the mouting enthusiasm for "solving" the gas crisis by drilling in coastal waters. In spite of almost universal expert opinion that this is stupid and futile, Americans adore the idea. It is such a PRETTY idea. Cute one might say. So much so that Obama has had to cave into it. McCain of course did so early since he knows that the stupider the idea the more popular it will be with the US public. One has to conclude that McCain should probably win since Americans would be uncomfortable to the point of hatred with a President with brains. The dumber the better.
LawyerLiz writes: I also don't know why they don't file for efficiency judgments, but they don't.
Excuse me?
I will forgive you for not knowing your Foxfires from Firefoxes, but...efficiency judgments, LawyerLiz?
jim writes:
I asked earlier what could explain why McCain is running almost neck and neck with Obama. I posited possible racism. But then I remembered H L Mencken. Remember him? He was the person who demonstrated his eternal insight into Americans with the remark that "one can never underestimate the intelligence of the American public." Truer words have never been spoken. Recent proof is the mouting enthusiasm for "solving" the gas crisis by drilling in coastal waters. In spite of almost universal expert opinion that this is stupid and futile, Americans adore the idea. It is such a PRETTY idea. Cute one might say. So much so that Obama has had to cave into it. McCain of course did so early since he knows that the stupider the idea the more popular it will be with the US public. One has to conclude that McCain should probably win since Americans would be uncomfortable to the point of hatred with a President with brains. The dumber the better.
jim | 08.03.08 - 9:00 pm | #
Like a multiple choice test - never change an answer... your first choice was probably right (racism). O might win but he'll have to swim against that current as well as beat McCain on the issues. Not sayin' its right - just sayin' it is.
Oh and I am certainly not suggesting all or even most potential McCain supporters are racist - but in a close contest like this & considering our history to deny race isn't part of the mix is to deny the obvious.
One last thing jim - I'm lukewarm to both candidates for different reasons... BUT I still expect McCain to win easily from an electoral college perspective... I think McCain will get more than 300 electoral college 'votes' with the same battleground states as always making the difference... OH, FL, PA - O needs most if not all and I don't think he wins a single one of them. He will also struggle in WI, IA & MO - again O is likely to be shut out though not by as much.
The parts of all those states he needs to make ground in are the areas I know well - white redneck blue collar areas. Think south-central Ohio, western Pennsylvania, north & western Florida (panhandle).
It will be a tough sell to get those folks on board... it won't be enough for O to just say "Vote for me - I'm not the Republican"... They will want to know... "Okay, so what can you do for me? For my problems?" What can O tell them they haven't heard already? O's team finds a CREDIBLE answer for that and they might get those voters. They aren't even close to that so far...
re: Rubin
Sounds like someone wants to be the Treasury Sec.
Honestly these guys are all douche-bags and comment on political goings-on as the wind changes direction every five seconds.
We've had enough of these people....
Ciao
MS
Anonymous writes:
re: Rubin
Sounds like someone wants to be the Treasury Sec.
I saw Rubin interviewed lately & they asked him if he wanted to be SotT - he said 'NO WAY' - but he said he has people he could suggest O hire...
I thought 'Oh, great - just what we need, another heavy hitting exec of a failing IB placing hand picked cronies into Treasury - no conflict of interest there.'
I'm not sure he (and Paulsen) aren't more dangerous out on the loose than in the confines of the Treasury.
dryfly:: well racism in part but it is really stupidity behind it all. The nonsense about drilling in the coastal areas makes it clear most Americans are very stupid. You might say "uninformed" but they are and remain "uninformed" because they are too stupid to get informed or respect the people who could inform them. When a 'brain' tells them something they reject it since they don't like 'brains'.
Yahoo! 404 - Page Not Found
That so many Americans would want a continutation of the last four years even though at the same time they say they want change is clear proof of addled brains and confused thought. If Americans elect McCain they will richly deserve what they get as a result. Of course they will even be too stupid to know they have screwed themselves. Not much hope.
Jim-
re."Why do people support McCain over Obama?"
Can't speak for anyone but myself, but, after watching the Dems in Congress fall all over themselves for the past year and a half to KEEP the HOUSING MARKET INFLATED beyond the reach of hard working Americans and then hearing Obama prattle on on CNBC about how the "Government needs to put a floor under home prices"....Well.....I just snapped and decided to never vote Democrat again. Period.
Then there's the small matter of the Fan/Fred/Housing Bailout vote in Congress last week.
And all the food and oil inflation that's been caused by their total kissing a$$ of Bernanke, Paulson, the REIC and Wall Street.
I'm of the opinion now that the absolute worst disaster for poor, lower and mid income people in this country is for the Dems to be in power. Their love affair with inflation is killing those people.
At this point, I wish the Dems would just go the way of the Whigs. I'm through.
Yeah yeah yeah, Obama's great, I'd like to have him over to the house for dinner and a chat, good company I'm sure.
But President? No.Way.
You're really grabbing at straws there jim with the racist thingy. Following your line of reasoning, how the heck did he get the Democratic nomination....hmmmm?
Dryfly - I wish I could say I'm 'lukewarm'. I'm more in the 'violently opposed to either of these candidates.' camp at the moment.
I never thought I'd see this country lose it's place as top economic power in my lifetime. That will probably happen inside of 10 years now. Neither one of these jokers will forestall that. They just don't understand that the economy is the #1 issue, and even if they did, they have not the first clue what to do about it. And fuckall if one can defer to Austin fucking Goolsbee to fix it all so we can all go back to bickering about bullshit 'racial differences' or Britney Spears or your distraction du jour.
Is this the emergency medicine residency blog? Is a resident told before beginning how long it will take or does it depend on blogger input?
I posted on the same page with Mish!!!
I'll never clean my keyboard again !!!
Yes, default, selling insurance is a great business if you can salt away premiums before declaring bankruptcy.
I ask you again, are you quitting your "job" tomorrow or continuing to be part of the problem?
I'm trying to figure out how to sell an
entire piece of land ten times, to ten
new "sole owners".
I think it will work best if the
parcel does not actually exist, as
long as they don't actually want the land.
Who can I call on RICO Street to
set this up for me, and hedge the loans ?
I hear there is always a market for anything.
.
waitinginPNW writes:
You're really grabbing at straws there jim with the racist thingy. Following your line of reasoning, how the heck did he get the Democratic nomination....hmmmm?
waitinginPNW | 08.03.08 - 10:51 pm | #
Spend time in Middle America like I do - there is CLEARLY a race element working. Real time - not drive by.
There are folks out there - working class - who have absolutely no reason to vote GOP... the GOP has waged economic war on them for decades... Dems too but GOP way worse. They voted for Bill C but mostly went GOP the last 30 years for strictly 'God & Guns'.
There was no way they would vote either Hillary (sexism) or Obama (racism)... This race/gender talk is the po'white blue collar equivalent of black barbershop talk... you have to belong to hear it & I've heard it with my own ears... plenty of it.
And they won't tell exit pollsters either... but it will be there.
As for why did he get nominated? Because a tiny minority of partisans select the candidates of both parties and neither of these groups are in touch with the larger population most of which are semi-partisan or non-partisan.
As for you voting against the Dems? Whatever - I could care less. Lots of people find reasons to support their partisan leanings - you have yours & others have theirs - fine, vote - its your right at least for now.
Maybe we get the leaders we deserve.
But 12 years of CoCain would be
cruel and unusual.
.
To choose McCain over Obama because you think Obama will mean inflation seems quite silly to me. The US needs a radical CHANGE of course and only Obama could bring that. Almost anything would be preferable to a continuation of the present policies. And that is what we would get with McCain, not to mention a not very bright guy who is a muddle head who campaigns by exploiting, as did Bush, ingrained American stupidity. I agree that the mere fact that Obama got the Democrat nomination hardly means the US heartland isn't racist. It is; it just pretends it isn't.