Based on bullshit
TPM points us to Larry Kudlow crowing about a potential bank stocks rally due to upcoming accounting rule changes. Kudlow says that these changes will lift the “jackboot” of the Securities and Exchange Commission “off of the market”:
For those of you at home who don’t follow financial news as obsessively as I do, Kudlow is talking about this:
The Financial Accounting Standards Board, pressured by lawmakers to change the fair-value rule blamed for worsening the financial crisis, proposed permitting companies to use “significant judgment” in valuing assets.
[…]
Fair-value, also known as mark-to-market accounting, requires companies to set values on most securities every quarter based on market prices. Wells Fargo & Co. and other companies argue the rule doesn’t make sense when trading has dried up because it forces banks to write down assets to fire- sale prices.
What this boils down to is that the government will allow banks to pretend that their worthless assets are worth significantly more than what the market will pay for them. In other words, banks will rescue themselves from insolvency by using the magical power of bullshit.
The fact that Larry “The Housing Bears Are Wrong Again” Kudlow supports such a move should be surprising to no one. After all, Larry has long written about the virtues of a bullshit-based economy:
Homebuilders led the stock parade this week with a fantastic 11 percent gain. This is a group that hedge funds and bubbleheads love to hate. All the bond bears have been dead wrong in predicting sky-high mortgage rates. So have all the bubbleheads who expect housing-price crashes in Las Vegas or Naples, Florida, to bring down the consumer, the rest of the economy, and the entire stock market.
See, here’s the problem.
For too long in this country we’ve had an economy based on bullshit. And while it’s produced temporary booms for Pets.com shareholders and for home flippers, it has inevitably led us to the realization that we’ve invested a ton of resources into stupid crap that nobody actually wants. And since we don’t make things such as electronics or textiles anymore (and we soon won’t be making cars either), I really have to wonder just what we will base our economy on once all of our bullshit options are exhausted.
Then again, it may well be that we’ll never run out of bullshit options. For as David Brooks’ column today demonstrates, the desire to get rich by investing in bullshit is as American as apple pie. Let the great POG Boom of ’09 commence!
Sometimes I find it amusing to think about what CNBC would have been like if it had existed in 1929.
Remember me? I’m back. In POG form.
Oh my, but I do hope Kudlow challenges Chris Dodd in the next Conn. senate race. I’ll enjoy the sight of Kudlow’s ass parked between his shoulder blades, with one of Dodd’s Bruno Maglis still stuck in it.
Maybe we can live on snark. NOM.
I posted that link in a previous thread. As I said there, I don’t doubt that he’s gone long on short positions. I don’t think he’s as stoopid™ as he seems to be*. No, market manipulation is his game. Piece of shit.
* Bad timing and myopia describe him but I think the stoopid™ is a facade.
I’m not convinced the government is interested in regulating finance to prevent a disaster similar to the current one. It can’t even set rules for how bail out money is to be spent for god’s sake.
AIG’s contractual obligation to pay bonuses should rest first on its ability to pay, not its obligation to pay. The company HAD NO MONEY until it received cash from the government. What in God’s name is the government doing trusting scumbags with money it has a proven track record of mismanaging in the first place.
This may be new legal territory for the government but a case needs to be pursued and made against this further thievery. If Obama doesn’t get a handle on this, i.e. clearly legislate what can and cannot be done with bail out money before it is issued, he will not last beyond one term; and his inspiring words and promises will amount to nothing but empty rhetoric.
Samantha Bee did a bang up job of snark-knifing a sociopathic stockbroker who crowed about the joys of short selling on last night’s Daily Show. It was unbelievable. He admitted making pockets of dough and couldn’t care less about who was victimized in the process. I wanted to reach through the screen and strangle the fucker.
“Samantha Bee did a bang up job of snark-knifing a sociopathic stockbroker who crowed about the joys of short selling on last night’s Daily Show. It was unbelievable. He admitted making pockets of dough and couldn’t care less about who was victimized in the process.”
Eh, I don’t really care about shorting unless they’re spreading rumors to cause the stock to fall.
If a stock is falling because the company sucks, well, tough.
Eh, I don’t really care about shorting unless they’re spreading rumors to cause the stock to fall.
Rumour mongering is precisely what most short selling was based on; and the stockbroker admitted it.
We don’t need no stinking SEC, the market can lift itself by its own jackbootstraps.
The SEC is useless. It even ignored complaints about Madoff.
So is ‘bubblehead’ his derogatory term for people who think there was a housing bubble. Does he still seriously deny that there was a housing bubble?
The SEC did an investigation, probably of fake books, and didn’t catch it. Sometimes regulatory agencies legitimately just don’t catch stuff, sometimes there’s pressure or corruption or other internal issues to clean up, but useless? No.
On the behalf of my parents, who only barely managed to escape an adjustable-rate mortgage solvent after jumping into it on the advice of the Bullshit Market brigade, I’d like to invite Kudlow to spend the rest of his life face-down in a shit moat.
Tigrismus, the SEC is only as good as the teeth it has. Currently, it is toothless. In fact, it did not investigate Madoff and the one independent guy who tried to bring Madoff down was laughed out of the room, even as he told the SEC he feared for his life. (I’ll dig up the story.)
For too long in this country we’ve had an economy based on bullshit.
That’s all right. Let’s talk about how atheists are oppressed.
That’s the real story.
Madoff was a universally well-respected market-maker; that was the entire basis of his Ponzi scheme, his name and reputation. The SEC failing to investigate him before he or his loved ones admitted to wrongdoing isn’t as big an oversight as it gets made out to be; it’s like finding out Stephen Hawking has just been making up numbers for the last ten years.
Of course, part of the problem was systematic – the market’s job has essentially been to reify the rumor mill among the increasingly insular and ridiculous plutocrat class, so the kind of lies done by respectively a market-maker and a ponzi-schemer are only really separated by how many degrees of separation they have from actively selling snake oil. But outside of burning Wall Street to the ground, what can you do?
According to the latest numbers, 70% of homes in Las Vegas have loans on them for more than they’re worth. Among the highest foreclosure rates in the nation. Also. Fuck Kudlow with a family of porcupines.
“That’s all right. Let’s talk about how atheists are oppressed.”
Is that you, Leon Trotsky?
If there’s one thing a market economy cannot abide, it’s transparent market values.
I’ve read about Markopolos, but the SEC did do an investigation in 2006 in response to his complaints. Madoff was questioned under oath on May 19, 2006, and lied.
Exactly the fucking same as it is now.
The problem with bullshit is that we really don’t have any idea what anything is worth. Maybe things aren’t as bad as they look on the chalk board. Maybe the damage is more confined to specific sectors of the economy. Maybe a little more sunlight will make the solution to our problems more apparent.
But we’ll never find that out at this rate, because someone is still pissing himself in fear that if HIS stocks are source of all the trouble then he’ll lose the remaining 20% of his net worth.
In the mean time, the market is clearly massively oversold in areas that haven’t been buried six feet under all the bullshit. But nobody knows which bridge is going to give next or who is going to take the next hit, so everyone’s bottled up in T-Bills hording what net worth they have left.
What a god damn clusterfuck.
We’re Exurbia Central. You ought to see Blue Diamond – it’s an hour from the nearest Subway and people pay seven digits to live there.
Here you go:
Madoff Whistleblower Assails S.E.C. for Ignoring Him
February 3, 2009, 6:32 pm New York Times
Boy, Tigris, you’re really cutting the SEC some mighty slack there. Can’t say I’m willing to give the same benefit of the doubt to that scummy agency.
I was talking about this over at Fire Megan McArdle, and, as much as I hate to see it, he might have a point (I think, from the way that he talks, though, that this is purely accidental.).
The FT was reporting that some groups of CDO’s were now valued at as little as 5% of their original mark. I don’t understand how something backed by loans could lose that much value unless 95% of the loans default, rates we are nowhere near. Then add in the fact that they were talking about the highly rated tranches. Those should return higher than the default rate because they’re first in line! Sometimes it seems to me that we might be in an inverse bubble. The bubble popped, people freaked, and now all these companies are “insolvent” in the same way they were “profitable” before, that is, only in people’s minds.
Seriously, everyone was deluded that we were flying high before, whose to say we’re not deluded into believing that we’re on the brink of extermination? We’re relying on the same media that told us everything was peaches to tell us that everything is crap now. We’re trusting the same people who trumpeted their “gains” to honestly describe their “losses.” It’s ALL fucking bullshit. We’ve traded one kind of crazy for another. WTF?
I am not saying there ISN’T a recession, just that many aspects of it are completely misunderstood and so there’s as much chance that they’re being overblown as there is that they’re being understated.
I mean, I don’t even get any of it. We still have plenty of shit for people to use, cars are just sitting on the lots, but now we’re not allowed to drive them home? Why? None of it makes sense. It’s just a stupid system that has stopped working. It’s fucking maddening.
I don’t get why they don’t just use all this fucking money to make some new banks that aren’t full of toxic shit and make one simple fucking rule for the SEC to enforce. Sell, simple, easy to understand assets and investments and if it even LOOKS like you’re trying to hide something we fucking hang you. Then, if you’re willing to live by that, you can HAVE your bazillion dollar bonus. I just want a fucking place to live and an iPod, maybe a TV and a Wii if you don’t mind.
“Blue Diamond – it’s an hour from the nearest Subway and people pay seven digits to live there.”
Let the yuppie dipshits move to Blue Diamond. Las Vegas was better before it became a suburb of L.A.
Like Palin or Kristol, he is stupid, but on an entirely different level than he thinks. He’s a legitimately incurious half-wit who honestly believes that if he plays a starry-eyed Pangloss moron on TV, the peasants will make him rich.
It’s a well-established genre, and becoming depressingly common these days. I’ve said it too much already, but you really need to watch The Power of Nightmares if only to see Bill Kristol try and pull his Strauss routine on the interviewers.
The modern political experience in America is being condescended to by idiots.
“The modern political experience in America is being condescended to by idiots.”
QFT.
Only problem with that is, except for North LV, almost the entire city is the product of one generation or another’s exurban yuppies. Summerlin was as ridiculous and remote ten years ago; these days they’re probably degentrifying in a hurry. My family’s first house was in the middle of nowhere out on Ann and Riley, with the desert right up against it; I remember going back five years after we moved and it was just another damn sprawl.
Then add in the fact that they were talking about the highly rated tranches.
I have zero expertise and knowledge about this, but I thought part of the problem was that they mixed up all the tranches. They said, “hey, this tranch is all good stuff, and these other twenty … look, it’s Enrico Pallazzo!” And then they rated the whole package as if it were all good.
In other words, I think things are probably not as bad as they seem, I think they are probably worse than they seem.
Brad has it just about right. Nothing about this economy is sustainable.
From the zero lower bound problem to consumer debt exceeding 100% of GDP to a 13 Trillion dollar economy based consumer spending with flat incomes and 8% unemployment and you have an entirely imaginary economic structure that requires huge deficit spending, huge trade deficits and increasing household debt.
I’d like to see the explanation of how that’s supposed to work in the future. What is the engine for economic growth in the next couple decades? And where is the capital going to come from?
mikey
My money is on selling handjobs to Chinese tourists.
Mighty slack? Madoff admitted he lied to them under oath during their investigation, and he gamed the already lax regulations covering hedge funds to avoid the minimal reporting requirements there are. Sure they could be better, a lot better, but they’re not useless and hopefully under Obama they’ll get better.
Indeed, what could be better for a bullshit-addicted financial sector that’s pissed away the trust of small investors than to jerry-rig the blackjack table AGAIN & invite everyone back for another hand?
SEC jackboots? LOL! They’re as useless as tits on a bull & have been since Reagan made them corporate buttboys via deregulation, if not much longer.
Remember what an awesome job they did with preventing the S&L’s from swiping half a trillion? Or how they courageously busted all those myriads of book-cooking crooks (five whole convictions IIRC) at Enron? Yeah, & the guy who got the dirt on Madoff said it took him a whopping 15 minutes to work out that the guy was a fucking crook, yet even with the evidence staring them in the face, the “watchdog” SEC left him alone for years & years. Shitcan the slackers & create a new job opportunity for folks who have the skills & spines to do what they couldn’t be bothered to do: make some of these soulless grifters into Bubba’s New Bitches.
“Summerlin was as ridiculous and remote ten years ago; ”
I know. I first moved here in 1990, when Summerlin was still unfinished. Green Valley was the hot suburb in those days; Eastern dead ended in the desert where 215 is now and Red Rock was a 20 minute drive away from the nearest sign of civilization. It used to be a quirky little city with an interesting main drag running down the middle of it. Now it’s sprawling and expensive and running out of money and water. I don’t really want to live anywhere else.
You’ve asked the (no pun intended) million dollar questions, Mikey.
The castle of cards is collapsing, and the authorities hope to reassemble it with lots of pretend and imaginary glue.
My money is on selling handjobs to Chinese tourists.
Alas, the GDP growth estimates from China are made up horseshit, too. Few Chinese handjobees will be coming. (Ho ho!)
Happy Saint Paddy’s Day!
*hic*
What is the engine for economic growth in the next couple decades?
When the Chinese have all our money, then they will be able to afford to vacation here, and you will all have jobs serving up Big Macs and cleaning hotel rooms.
Madoff admitted he lied to them under oath during their investigation, and he gamed the already lax regulations covering hedge funds to avoid the minimal reporting requirements there are. Sure they could be better, a lot better, but they’re not useless and hopefully under Obama they’ll get better.
Madoff admitting he lied is a big DUH moment. The SEC ignored the complainant for years. The complainant has reason to believe the SEC may have been in cahoots. The fact that reporting requirements are minimal makes the SEC useless. It will only be useful when its members are replaced and its oversight capability is beefed up. Right now, it’s a toothless piece of shit staffed by shitheads.
the authorities hope to reassemble it with lots of pretend and imaginary glue.
Yes!
Green Valley seems like the only ex-suburb that actually stayed nice-looking. That might just be its relative youth, but even compared to what I remember from the earliest part of my childhood (late Bush I) my grandparents’ neighborhood (roundabouts Pecos/DI) declined pretty sharply from when they got into it.
The entire depressing experience is just the closing end of the long arc begun in the 50s with the massive move out to suburbia and the idea that owning real estate was something that was universally possible, to say nothing of acceptable. I can understand my parents getting into a nice house – medical residents’ future income tends to mushroom out – but there are so many people who were sold homeownership with far too little money and no future prospects. And we’re the locus of that – one giant sprawling suburb where sleeping above the second story makes you a tourist or a peon.
The reason I say ‘depressing’ is that my parents want to get the hell out, but they’ve still got that mindset. As people born in the 60s west of the Rockies, they’ve never seen a place or time where the landlord isn’t entitled to your immortal soul, so they get burned by the banks again and again and think themselves lucky.
Well, be thankful they’re not wasps. Handjob-bees can only go once, see.
Several problems with the SEC, from my leetle viewpoint,
The SEC was pretty much toothless. That impotence was compounded by willingness of the top honchos to trust that their buddies woud never do something so horrible, if not actually looking the other way, Compounded further by understaffing. Compounded furether yet by inappropriate staffing.
That last one needs a bit of explanation. The SEC is comprised mostly by lawyers. Most of them, I am sure, are dedicated public servants – hell, they would have to be to accept the shit wages the gummint pays when they could be making humongo bux working for the very companies they are supposed to be keeping their eyes on, amirite? The problem with that is they just don’t understand the finance business. The Wall St. biggies hire tons of mathematicians, physicists, computer scientists, etc. Those folks are the ones who create the trading models and scenarios and so on and so forth. The lawyers are there to (try to) make whatever the big brains come up with legally sound. The traders themselves? Mostly a bunch of dumb privileged kids with MBAs that wouldn’t know an original idea if it fucked them silly.
In other words, the SEC was (and is) problematic becuase the people who do the work there simply don’t know to make sense of what Wall St. is actually doing. We need to put some of those academic mathy types in at SEC and turn em loose. It might not make enforcement any easier but I guarangoddamnty they’ll be better at recognizing/finding the cheats.
Goldilocks, bitches!
JC: As for moving, as natives we’re largely after trees, seasons, and rain – so me & Sam are moving to PDX and probably taking the family with us. If you wanted a similar climate without the typical basin-and-range horseshit that goes with, I’ve heard good things about Austin, which is where Texas exiles everything that isn’t horrible to avoid scaring off Whitey.
PS – Proposing solutions is more satisfying than bitching about the problem. Unless the problem is whingnutz. Even then, it’s not the bitching but the devastating ridicule.
YMMV
“I’ve heard good things about Austin”
I was born and raised in San Antonio. Texas would be nice, if it weren’t full of Texans. Austin is an island of sanity surrounded by a sea of redneck horseshit.
PDX? Seems like most of the people I know who leave this town go to the Pacific NW, going from not enough rain to too much rain. When do you plan on leaving Vegas? Maybe I can buy you a drinking liberally drink before ya go.
PeeJ, I’d love to see an expose of the SEC.
Re CEC lawyers’ wages: although they wouldn’t be close to the salaries of stockbrokers and finance executives, they’re not that bad. Certainly more than liveable. And lawyers who don’t want the option of working for government can always privatize. And lawyers gain useful experience in government to further their careers in private industry. For example, tax lawyers spend time working for government finance departments and then switch over to well paying industry jobs as tax advisors whose specialty is loopholes. The same probably holds true for SEC investigators.
Problem is, you’re thinking of the SEC being staffed by an administration that actually wants to see the cheats stopped. As Cramer’s ridiculous song and dance showed, for the most part people who made their bones cheating the system have, if anything, a vested interest in keeping the system cheatable; outside of the rare burst of accountability and decent government, a system in which regulators are expected to be drawn from the ranks of the regulated is a recipe for captive regulatory bodies.
Indeed, the best appointment Obama’s made so far was replacing the standard practice of fossil-industry barons ruling Energy with – gasp – an academic.
PS – Proposing solutions is more satisfying than bitching about the problem.
The solutions are pretty goddamn obvious, though, aren’t they, in the case of these regulatory agencies. For this reason, I reserve to bitch about them as much as I goddamn well please.
reserve the right, that is. 😉
angry typing fingers.
Probably this summer, although I’m probably going to save the massive drunken fuck-you bacchanal for whenever my parents and siblings leave this awful town. (Although in a more meaningful sense I expect to be fully rid of Vegas once I can no longer instinctively remember how to distinguish the various species of bicycling Jesus salesman based on variations in their corporate-style attire.)
alec and JC:
I lived in Austin quite the number of years ago and I now live in PDX. As for PDX, you get the rain in spades, trees galore and seasons to adore. But that’s hardly the best thing about living here. You are SO going to like Portland, alec. PDX is where sadlynaughts should want to go when they die.
Austin, or, as we used to say, “Lost in TX”, wasn’t even in Texas. Texas surrounds Austin but it aint part of it. But “basin and range” doesn’t really work very well either. The hill country is georgeous in it’s way and there’s a lot more water than most people think. And it’s usually
prettyreally fucking humid.Ideologically, I’d say PDX and Austin are about as close as two cities can be. I’d be open to moving back to Austin (if circumstances should require it) even after living in PDX; and that’s about the strongest recommendation I could possibly make.
I think that you’re all missing the point that Barak Hussein Malcolm X Lenin- who- wrote- a -book -on- Marx Obama, has caused this economic mess. People such as Mr Kudlow are forced, FORCED! I tell you, to make wild pronouncements in the left-wing media just to get noticed. It is a sad day Amerka
” various species of bicycling Jesus salesman based on variations in their corporate-style attire.”
To the tune of That’s Amore by Dean Martin:
When a man
bikes on by
in a white shirt and tie
That’s a Mormon.
the government will allow banks to pretend that their worthless assets are worth significantly more than what the market will pay for them
Brad, FASB is not the government. It is an “independent” board comprised of accountants who should know better.
FASB establishes what is and is not considered “GAAP” (Generally Accepted Accounting Practices). GAAP used to say that a company listed investments and assets at cost, unless they took a significant hit to their value (i.e. burned up in a fire)
This was known as the theory of lower of cost or market and worked fine for nearly 100 years.
Then some bright light discovered that accounting firms could make gobs more money by selling consultations, which meant pumping up the asset values of the clients they were supposed to be auditing…you know, performing their fiduciary duty to report factual information to the investment community in order for them to make informed judgements with respect to the viability of the company in question.
Side note: This is what took down Arthur Andersen during the Enron scandal: had they not been tied at the hip with their consulting practice, they would (or rather could have…the fees they earned as auditors were pretty high in their own right) have blown the whistle years earlier on the Ponzi scheme.
What FASB did at that time was bend the rules a little. A brokerage could always list investments held (like private companies that they owned significant shares in but were about to take public) at the greater of cost or market value, as a sop to the investment banking community.
They sort of, um, bent the meaning of “investment banker”, you see…
Problem is, you’re thinking of the SEC being staffed by an administration that actually wants to see the cheats stopped
Well, yeah, there is that.
Also, I deny ever having an infatuation with anyone named “george.” That was a simple type, totally without freudian significance. That guy whose pic tintin posted in the last thread, on the other hand….. *sluuuurrpp*
god fucking damn it. “typO”
I haven’t even started drinking yet today, honest.
“Probably this summer, although I’m probably going to save the massive drunken fuck-you bacchanal for whenever my parents and siblings leave this awful town”
Well, if you’re so inclined, drop me a note here before you go and that drink is yours. I still want to shake your hand for a smackdown you dropped on Truthie several months ago.
Insert joke about Egyptian cotton futures and M&M Enterprises here.
Grass grows, birds fly, the sun shines, and brother, I hurt people.
“I really have to wonder just what we will base our economy on once all of our bullshit options are exhausted.”
Corn and guns.
DINGDINGDING Tulips! There’s a huge future in tulips!
WOOT WOOT WOOOT WOOT
The price will never go down!
Looks like the bears on South Sea were wrong again! (AWOOOOGA)
The United States will lead the world in exports of corn, guns, real Kentucky bourbon whiskey, and fursuits.
“The SEC failing to investigate him before he or his loved ones admitted to wrongdoing isn’t as big an oversight as it gets made out to be; it’s like finding out Stephen Hawking has just been making up numbers for the last ten years.”
Science fail. No, even Stephen Hawkings’ papers are still peer-reviewed.
There are no Gods or gods in science.
“PDX is where sadlynaughts should want to go when they die.”
I came here 15 years ago from Appalachia and truly thought I’d-died-and-gone-to-heaven. Bookstores, thoughtful people, theaters, lots of biking and volunteering. All of that is still so. Come on over- there’s 10% unemployment but housing’s coming back down near where it should be, and there’s always some kind of grunt work. What are your skills?
Well, this is where the analogy breaks down. I guess he’d have to be submitting papers exclusively to a no-name journal run by a friend of his. I was more aiming for an equivalence of reputation than anything – a scientific academy run the way American finance is would probably get bad enough to shame Lysenko within a coupla decades.
Is there any way we can get that jackboot to stand on Kudlow’s neck for a while?
I enjoyed my visit to PDX back in june for Drinking Sadly II – The Porlanding. Very pleasant place, great to get around without the car, nice for relaxing with a cuppa chai and watching the world go by.
But I dunno. The pace is kind of a plod, or if it happens to be sunny a distracted stroll.
I think I would suffer from sever adrenaline depletion. Silicon Valley is ugly, loud, phony and smells really bad, but goddammit it can be FUN. Somebody’s always pushing all their chips in…
mikey
“Somebody’s always pushing all their chips in…”
I see what you did there.
Funny thing about plodding: when you grow up having to deal with heat-stroke after doing it for half an hour in the winter, it seems surprisingly underrated.
(Other big shocker: leaving Vegas on vacation and only realizing three days in that daytime isn’t a horrific nightmare of scorching heat.)
“leaving Vegas on vacation and only realizing three days in that daytime isn’t a horrific nightmare of scorching heat.”
I like to visit Ohio in August and complain how cold it is.
Dsquared deserves some credit for pointing out nearly 9 years ago that when the housing bubble eventually bursts, it will be necessary to assign insanely overvalued prices to whole new groups of tradable items so as to create new bubbles. The speculative markets he suggested were cars, guns, baseball and Beanie Babies.
Or should Dsquared be content with the credit he’s already receiving for the Shorter business?
a scientific academy run the way American finance is would probably get bad enough to shame Lysenko within a coupla decades.
That would be the alternative-medicine arena.
I dunno. Are there people who even pretend to be regulators? It all smells like uninhibited marketeering to me.
mikey is right about Portland. It’s a perfect place for you if your idea of a good time is poking around book and craft stores all day, having a really good meal and a lot of beers, and then going to bed at 11. Perhaps smoking a bowl fits in there somewhere. Whatever. It’s not a good place for you if you like late nights or thin people.
“or thin people”
If you must have thin people, I suggest moving to a third world country. In case you haven’t noticed, most of us are lard-asses.
Don’t get me wrong. I’m a proud resident of Portland. What I described above is exactly my idea of a good day. But even the fit, outdoorsy people in Portland are a little husky. It’s probably the beer. Hey, I like fat people. I’m one myself. But I call it as I see it.
It’s not a good place for you if you like late nights or thin people.
Imagine my consternation one night to reach the Portland branch of the Rogue Brewery people at 10.15, only to discover that it closed at 10.
Now that Bush lacks diplomatic immunity, will nabbing him be possible?
Countries willing to try should keep it secret so he isn’t tipped off ahead of time on his rubber-chicken-goulash-speaking-to-yahoos circuit.
Imagine if street criminals had invented a whole new type of bad stuff to do to people in the 1990s and the NYC government decided for whatever reason to prevent the NYPD from having anything to do with chasing after the bad guys for doing all that new bad stuff. They’d still be going after murderers and rapists and the like so to call them useless would be wrong. That’s not to say they wouldn’t have fucked up some investigations and missed some major conspiracies that would have caused a lot of people to be all like, WTF? But they wouldn’t have been useless any more than the SEC has been useless up until now. They’re generally as useful as they’re allowed to be. Another way to look at it is that if you’re a street kid selling drugs or one of his customers you have a good chance of being busted by the cops but if you’re a dealer who sells coke or the gourmet hydro to upscale customers you’re going to be able to get away with it for a lot longer because the cops aren’t spending a lot of time patrolling and surveilling Upper East Side apartment buildings. In this analogy the high end guys are the hedge funds and derivative markets and the street dealers are the traditional Wall St. businesses. If for example you’re in the retail brokerage business you live in holy terror of the SEC. My ex wife is in that business managing a bunch of branches and spent about half her time on compliance issues. I think she’d love it if the SEC were useless. Not that she’s crooked. She’s not at all but I think she’d love to be able to relax a little more and not always be worried that some dumb move by some boneheaded broker is going to cost her all her licenses and her way of making a living.
“I really have to wonder just what we will base our economy on once all of our bullshit options are exhausted.”
I’m afraid it’s bullshit all the way down. You’ve been allowed to do it because you are such rapacious consumers. It’s how the thing was set up. Other people do the making, you do the buying. That’s all there is.
To be absolutely precise, “fair value” doesn’t equal “mark to market”, although in practice it does tend to mean it. The distinction is between “fair value”, which is in theory how much you could obtain in an orderly sale of the asset today, and “amortised cost”, aka book value, which is the price you bought or originated the asset, amortised over time, minus impairments for imminently expected credit losses.
You always have to use judgement to determine fair value. What this new guidance about is the amount and sorts of judgement that can be used to determine whether or not a given trade is “distressed” and whether a given market is “inactive”. This in turn determines what level in the fair value hierarchy a given asset falls into, based on the type of inputs used to value it. Even using more judgement and fewer observable market inputs, the assets will still technically be accounted at “fair value”.
“The FT was reporting that some groups of CDO’s were now valued at as little as 5% of their original mark. I don’t understand how something backed by loans could lose that much value unless 95% of the loans default, rates we are nowhere near. Then add in the fact that they were talking about the highly rated tranches. Those should return higher than the default rate because they’re first in line!”
Again, to be precise, the FT reported that some CDO liquidations were realising 5% of the original value, which isn’t quite the same. That said, plenty of originally AAA tranches of mezzanine CDOs are and/or should be marked at 5% or less. You have to remember that CDOs (of ABS) parcel other securities, not mortgages directly. So you can (and typically did) have a senior CDO tranche where the underlying assets are all BBB or BB tranches of mortgage backed securities, which will be totally wiped out if loss rates (defaults x recovery rates) exceed, say, 15%. The reasoning was that the underlying mortgages and/or securities were geographically diversified, and that nationwide housing downturns were unknown since the depression, so that the CDO itself benefitted from diversification. Some of the underlying securities might default if, say, California had a downturn, but the idea was they wouldn’t all default because you wouldn’t have a nationwide downturn. Big mistake, obviously. So a lot of CDOs are facing defaults in all their underlying securities, and next to no recoveries.
A further complication – within CDOs of ABS, there are “mezzanine” CDOs (where the underlyings were typically BBB and BB tranches) and “mezzanine” CDOs where the underlyings were AA and A tranches. In the latter case, the diversification argument stands up slightly better, so they will see much lower loss rates on average. This is one of the reasons why you see such divergence in CDO valuations. Not the only reason – there’s still a lot of jiggery-pokery going on with valuations, albeit a lot less than six or 12 months ago.
It’s less alternative medicine and more batshit crazy medicine, but there’s always the Association of American Physicians and Surgeons and their journal JPandS, which is basically wingnut doctors’ answer to them high-falutin’ “researchers” what with their “peer review”. It’s basically a clearinghouse that’ll publish anything that meets its orthodoxy, no matter how crazy or incorrect, including a fair number of articles that have nothing to do with medicine; they like publishing regular articles on global warming denialism, for example.
The future will be made of Jute. That is all.
I lost everything in the Beanie Baby Crash of ’99.
The future will be made of Jute. That is all.
Did you say Jute?
The FT was reporting that some groups of CDO’s were now valued at as little as 5% of their original mark. I don’t understand how something backed by loans could lose that much value unless 95% of the loans default, rates we are nowhere near. Then add in the fact that they were talking about the highly rated tranches. Those should return higher than the default rate because they’re first in line! Sometimes it seems to me that we might be in an inverse bubble. The bubble popped, people freaked, and now all these companies are “insolvent” in the same way they were “profitable” before, that is, only in people’s minds.
That’s all well and good, except that these companies *profited from* and *traded on* the illusory high values of the CDOs in question. Now they want to be insulated from the illusory *low values* of the selfsame CDOs. It’s a perfect example of the ‘privatize profits, socialize losses’ meme that has taken hold of America’s collective mind of late.
Live by the illusory values, die by the illusory values. If you don’t want to die that way, then IMO the government can swoop in and buy you out for pennies on the dollar. Otherwise, choke and die, market boys. Let’s all recall that the personal bankruptcy laws were largely gutted just in the last two years, so I’d say that sauce for the personal bankruptcy goose is some nommy-nom-nom sauce for the corporate bankruptcy gander.
Ever been to Canberra?
NutellaonToast said,
The FT was reporting that some groups of CDO’s were now valued at as little as 5% of their original mark. I don’t understand how something backed by loans could lose that much value unless 95% of the loans default, rates we are nowhere near. Then add in the fact that they were talking about the highly rated tranches. Those should return higher than the default rate because they’re first in line! Sometimes it seems to me that we might be in an inverse bubble.
Tanta wrote a post at Calculated Risk about CDOs back in 2007 called “Leverage, Ratings and Forced Unwind”.
A CDO isn´t backed directly by loans, it´s backed by Asset-Backed-Securities. And the main problems seem to be that CDOs consists mostly of BBB to BB ABS bonds. The more risky tranches of an ABS. And that the whole thing is leveraged. So a 5% loss in the underlying ABS bonds for example can result in a 20% write-down in a CDO.
Stephen Gandel at Time did a marvelous job tracing how you could magnify a few, OK, many…bad assets into a total meltdown of a security.
Ever been to Canberra?
Spent 9 weeks there on a training course once. Ah, the Wig & Pen.
Thanks for all the love for my home town, Sadlynaughts. Yes the job market is pretty atrocious but other than that, it’s a great town. Look me up when you get here! I keep meaning to go to the Drinking Liberally things, haven’t yet, but will definitely start if I might meet some of you guys.
Also, there are plenty of downtown bars that stay open late.
Larry has long written about the virtues of a bullshit-based economy
That’s because when your only tool is a hammer, every problem tends to look like a nail.
After reading this posting, I contemplated the exact same level that I invariably wonder about when scanning new blogs and forums. Simply what do I think about this? Precisely how ought to it impact me? This and extra posts in your weblog right right here actually give some stuff to look at. I fundamentally ended up right here by way of Yahoo when I was very first doing some internet research for some course carry out that I have. Always very good instances searching by means of and I’m hopeful that you’ll keep on writing new posts. Cheers!