NWR: Financial chaos
- Thread starter SFJoe
- Start date
Chris Coad
Chris Coad
Ah, I didn't read that far, silly me. 191 Private jet owners, that's hard to argue with. Apologies to the researchers in question for unwarranted aspersions implied or assumed.
Sharon Bowman
Sharon Bowman
You guys need to go to sleep!
(With your mistresses, natch.)
(With your mistresses, natch.)
Chris Coad
Chris Coad
My mistress is already asleep. She has given her approval for me to remain awake and productive, if slightly tipsy from some fairly decent '05 co-op Saumur. I've got work to do, stories to tell, wrongs to right. Plus, I'm closing in on 500 myself. SFJoe, watch out!
Sharon Bowman
Sharon Bowman
I have paid my lover an extra $10,000 to remain asleep so I can start posting up a fury on Wine Disorder. In the past, I would only have given him $5,000 for this, but: hard times.
Chris Coad
Chris Coad
So you're bucking the cheapening-down trend among the wealthy keepers of the kept boy-toy set?
I admire that. Such largesse will go a long way towards keeping the International Chippie Market solvent through the difficult times ahead.
I admire that. Such largesse will go a long way towards keeping the International Chippie Market solvent through the difficult times ahead.
Sharon Bowman
Sharon Bowman
Oh, Chris, if only! It appears I am in the majority of female keepers-of-the-opposite-sex.
Viz. WSJ article: "Women were far more generous to their paramours in the face of financial crises. Less than 20% planned to lower allowances, gifts and perks, while more than half planned to raise them."
I am in the more-than-half sector. How unoriginal! I should shift tacks. We will see how he takes that, when he wakes up.
Viz. WSJ article: "Women were far more generous to their paramours in the face of financial crises. Less than 20% planned to lower allowances, gifts and perks, while more than half planned to raise them."
I am in the more-than-half sector. How unoriginal! I should shift tacks. We will see how he takes that, when he wakes up.
scottreiner
scott reiner
This guru doesn't know enough about banks as businesses to have a take worth taking. Recently, one of the biggest problems was that banks were quite opaque in their disclosures. When things were good, people assumed the best about what they couldn't see. When things went south, they assumed the worst. The same thing is happening to the financial arm of GE this week, as you can read in Joe Nocera's column.
I don't spend enough time on banks to know how much this has been repaired. Certainly the toxic assets have been marked way down on the banks' books, so they have more upside now, but I have no idea of the relative proportions of different securities held by the different banks.
As I understand the situation, the big problem is that no one has a good idea about the valuation of many of those mortgage-backed securities. Because of the way they've been split, parceled and sold, it's very difficult to get even such basic information as whether a particular mortgage is in default. And therein lies the problem: without a proper valuation, banks can assert that they're still solvent; as long as the gov't chooses to not force the issue, then (wink, wink) there's nothing fundamentally wrong. But, as long as there's the perception that some (all?) of these banks would actually be insolvent if their assets were appraised at current market value, no sane institution is going to lend them money. The parallels to Japan in the '90s are not heartening.
Mark Lipton
Zachary Ross
Zachary Ross
There is all that, for sure.
Also, Buffett's assertion that the cash flows of these unsalable securities is robust, but there are at least two reasons to be bearish about them. One is rising unemployment will force more people into defaulting on their mortgages. The other is that government-sponsored "cramdowns" of mortgage principal for distressed homeowners will negatively impact the securities based on them.
Mark - there are 3 separate valuation issues:
1. What is the "right" valuation? Mark-to-market even when market is non-existent?
2. Provisioning assumptions have been blown out of the water this time round, and insofar as any mark-to-market or mark-to-model valuation is dependent on expected value, it's going to be very volatile for some time to come.
3. Book-keeping and hygiene standards were definitely low during the go-go years; most banks don't have a clear idea of their actual exposures
Buffett is not a banking guy; I'm not sure he understands his insurance operations besides the cashflow portion.
CDS spreads have been some of the best early warning signals thus far (about 120 days ahead of the equity markets), and by that reckoning we're in real trouble this time round.
1. What is the "right" valuation? Mark-to-market even when market is non-existent?
2. Provisioning assumptions have been blown out of the water this time round, and insofar as any mark-to-market or mark-to-model valuation is dependent on expected value, it's going to be very volatile for some time to come.
3. Book-keeping and hygiene standards were definitely low during the go-go years; most banks don't have a clear idea of their actual exposures
Buffett is not a banking guy; I'm not sure he understands his insurance operations besides the cashflow portion.
CDS spreads have been some of the best early warning signals thus far (about 120 days ahead of the equity markets), and by that reckoning we're in real trouble this time round.
Fair enough. But, lacking the ability to value the assets of banks, how is confidence in the credit markets to be restored? Simon Johnson, late of the IMF, has two scenarios:
1. Force a mark-to-market valuation on the assets, even if it means forcing most (all?) of the large banks into insolvency and receivership.
2. Nationalize the banks, recapitalize them, install new boards and spin them back out.
The question is whether there is the political will in Washington to pursue either path.
Word.
Mark Lipton
Christian Miller (CMM)
Christian Miller
I agree, but the basic point remains - that when you add up the deductions, local taxes, sales taxes, social security etc. the tax burden has become even more skewed than just a look a federal rates would suggest.
Jeff Grossman
Jeff Grossman
I think this is the key. Decide how to handle this, and the rest will follow.
These are the doomsday scenarios. I hope a middle road, of some kind, can be found between destroying everyone's savings and destroying capitalism.
But that is Mr. Johnson's point. That middle road was taken, by Japan in the '90s when they refused to take either of these two bitter pills. The result: a decade of economic stagnation. His point is that you can pay now or pay later, and the longer you wait the more you pay. Bleak, but based on many years of dealing with crises much like this in other countries where nationalization of the banks is the default option. Right now what we've got is the gov't investing as much capital in the banks as they can without nationalizing them. What's to be lost by going that one step farther?
Mark Lipton
One fear is that some forms of nationalization and the like would trigger CDS obligations, which are amusingly sometimes many times larger than the underlying debts. (I've heard it compared to all your neighbors betting on whether your house will burn down, as opposed to just you getting insurance).
Cory Cartwright
Cory Cartwright
Last I heard it was around 60 trillion.
Jeff Grossman
Jeff Grossman
I cannot remember whether this has already been posted here: "The End" by Michael Lewis. It helped show me some the full horror of what our finance industry did. (It assumes that you already know the basics about MBS, tranches, CDS, etc.)