Posted on 06/20/2008 10:01:11 AM PDT by Ernest_at_the_Beach
Human nature and national behavioral patterns are highly cyclical and easily charted, especially the United States. Since you are educated I doubt you need discourse on it.
She must have lived through the Great Depression because my grandmother said the same thing. She never figured out that Democrats shouting ‘change’ ‘progress’ and ‘new deals’ were the ones passing laws to allow the bankers to take it to the nth. Those whom do not learn from history are indeed doomed to repeat it.
Bear Sterns got the short-end of the fees. So, ok it’s not a $40 trillion dollar problem its a $800 billion dollar problem. You must be from NYC Toddster. $800 billion could have provided a complete energy independence solution allowing America to retain it’s status as a solid Republican empire. Instead, arrogant, self-loathing bozos partied it up on steak and fine wine and having 9 yachts to ski behind. Your right though, people should really get a handle on math before publishing articles for mass media.
What is an $800 billion problem? Show your work.
You must be from NYC Toddster.
Chicago.
$800 billion could have provided a complete energy independence solution allowing America to retain it’s status as a solid Republican empire.
Who do you want to take $800 billion away from? Why?
Instead, arrogant, self-loathing bozos partied it up on steak and fine wine and having 9 yachts to ski behind.
Who are you talking about? Some people took $800 billion of their own money and spent it on stuff they wanted to buy? The horror!
Or are you claiming someone stole $800 billion? Who stole it? Who did they steal it from?
Depends on the value of the marked-to-whatever off the books asset blessed by the bond market. That number is not really. None of really know how much it really is without individually going through ten quadrillion pieces of paper. By the time that happens, America will be bankrupt.
Did the big money, educated guys leave there money in mortgage securities or back them out last May/June 2007 and into emerging markets and energy futures or didn’t they?
Why wouldn’t they keep there money long in mortgage securities if there was a net loss/net gain equation of 0? News flash, they pulled out because there is a winner and loser in fractional percentages because real-estate values were obviously overinflated and correction was inevitable. Hey Toddster, place your bets long on oil for us between August of 2008 and August 2009 for us will ya? There’s a net gain/net loss on equation on that one too.
How much did Bear, JPMorgan, Lehman, BofA etc etc lose? LOL!
Why wouldn’t they keep there money long in mortgage securities if there was a net loss/net gain equation of 0?
Hate to break it to you, but buying a mortgage security isn't the same thing as writing a derivative or a swap.
Hey Toddster, place your bets long on oil for us between August of 2008 and August 2009 for us will ya?
Hey, come back when you have more real info, will ya?
Nobody stole anything, did I say someone stole something? A failed economic theory by idiots was employed a long time ago by utopian, delusional Dems whom pass laws or repeal safeguards. Bankers are capatalists. I am a business owner and a capatalist. Both kinds of people at the top take it to the nth. However, we know the line in the sand between greed between competitors vs. taking it out on the little guy. And I don’t know the exact numbers, nobody does but $40 trillion is estimated by people on Wall St. and the Fed itself.
A broker pushing the paper is a useful lackey that will always defend failed economic theory and corrupt banking leadership because they get a tiny taste of the action. But the culpability doesn’t lie with you Toddster if you are a trader or broker of this.
The i-Banks know how much of there own paper there holding and why the deadline of September to come clean or no more discount window to do a deal. Instead, the I-Banks have quietly threatened the Fed Chairman with offshoring there entire operations if the Fed doesn’t keep the party and the fleecing of the taxpayer going. They sure are have become big stakes gamblers these days. But if you don’t know what I am talking about I am certainly wasting my breath.
Jim Sinclair is an idiot. Again.
From the Commitments of Traders report a/o 6/17/08:
3-MONTH EURODOLLARS - CHICAGO MERCANTILE EXCHANGE
CONTRACTS OF $1,000,000 - OPEN INTEREST: 14,233,322
Is this where he's getting the 1.4 trillion?
‘How much did Bear, JPMorgan, Lehman, BofA etc etc lose? LOL!’
Ask the shareholders of Bear Stearns. X amount of equity at $60 share several months ago vs. $10 a share after the JP Morgan deal. How much will JP Morgan make? The building itself was worth what, a billion? net/loss net/gain equation right?
‘Hate to break it to you, but buying a mortgage security isn’t the same thing as writing a derivative or a swap.’
Yeah no shit. The article is about derivatives and deravatives are DERIVED from a security based on an asset value stamped by the bond market.
I have you real information and that information is no one knows the exact numbers of derivatives themselves. Real estate values dropping are facts. Need a chart buddy?
I give you an numbers based on example and your poor excuse for a brain attempts to ask me to quantify the number. Not knowing real numbers of an obvious trillion something dollar massive problem but not knowing the exact amount of the scope of the problem in itself creates extreme volatility and why smart guys hedged in other areas such as energy or emerging markets. You keep defending bad behavior putting the entire public at risk by the i-Banks so put your money up while you drive around in your S Class. Oh let, me guess you just broker swaps or used to?
What was this?
Instead, arrogant, self-loathing bozos partied it up on steak and fine wine and having 9 yachts to ski behind.
Whining about people spending their own money in a way you don't approve, tovarish?
And I don’t know the exact numbers, nobody does but $40 trillion is estimated by people on Wall St. and the Fed itself.
$40 trillion is the estimate of what exactly? Source?
Instead, the I-Banks have quietly threatened the Fed Chairman with offshoring there entire operations if the Fed doesn’t keep the party and the fleecing of the taxpayer going.
Where is the taxpayer being fleeced?
But if you don’t know what I am talking about I am certainly wasting my breath.
You are wasting your breath, because your posts are an example of economic confusion (I'm probably being too kind).
Keep confusing derivatives with equity. It's funny.
The article is about derivatives and deravatives are DERIVED from a security based on an asset value stamped by the bond market.
My comments were in response to the link in post 12, Total Notional Value Of Derivatives Outstanding Surpasses One Quadrillion
Still confused?
I have you real information and that information is no one knows the exact numbers of derivatives themselves.
Do you believe Jim Sinclair when he says, "notional value becomes real value when either counterparty to the OTC derivative goes bankrupt"?
You keep defending bad behavior
Where did I do that? Link?
Oh let, me guess you just broker swaps or used to?
No.
1.144 quadrillion.
bttt
No, the averaged loss of value in the contract that goes bust is 2 to 3%, taken over the longer term and entire sector of derivatives. Some instruments, however, blow up in spectacular ways that expose the inability of a counterparty to pay even a significant minority of the value of the instrument, which is part of what has caused so much turmoil in the debt markets in the last year.
That’s what I was referring to when people come out and make predictions about the sum total of all derivatives blowing up and the full “notational value” coming due. That simply won’t happen. The losses from the blow-ups, taken across the whole derivative market, will likely amount to 2% of the notational value of the instruments in the sub-market (eg, CDS or other bond swaps in this case; there’s no involvement of options on stocks or commodity futures, which are part of that grand quadrillion total ‘notational value’ scare number).
Even if we were to take 2% of that total notional value of all instruments, we arrive at $20 trillion, which is (I believe) far, far too high.
Such scenarios would require that all derivatives contracts become due and payable all at once, and that the holder of the contract can, will or wants to demand full payoff all at once.
In the debt market, this isn’t the case. For example, each CDS class is different; some contracts have wiggle clauses, deferred payment clauses, etc. The holder of a contract can demand “accelerated payment” from someone who issued a CDS (eg, the monolines), but if this forces the monolines over the edge, then what was the benefit to the guy who wanted to be paid again?
I can completely believe, however, that when this Charlie-Foxtrot in the US credit markets is done, tho, that there will have been losses and write-downs adding up to $1T or more. The more I look into the debt derivative markets, the more I see that these instruments were created, sold, re-sold, etc, with little regard as to whether or not all the parties involved in the contract would be able to meet their obligations if the underlying instruments made an unforeseen move, the “black swan” issue of markets moving in co-ordinated downtrends. This is the result of stupid mathematics inside these instruments, and the Monte Carlo analysis used to “prove” how unlikely the failure scenarios are.
The best example of this is the “monolines” (who should be called duo-lines, really), who wrote credit default swap instruments on CDO’s. The monolines have nowhere enough capital to pay off the number of CDS buyers who will very likely have a legit claim to collect on the CDS contracts written on residential mortgage CDO’s and other instruments.
This has been evident to a lot of bond market analysts for quite a while, and people like Bill Ackerman have been talking about this in public for quite a while - like five years.
This is why S&P and Moody’s finally started taking down the ratings on MBIA, etc, this week: because the ratings agencies’ credibility is now on the line. To continue to insist that there was nothing wrong at MBIA (et al) would require a child-like innocence that allows children to believe in the Easter Bunny. There’s simply no way to wave a wand over MBIA’s balance sheet and say “This company can meet all their obligations easily” and give them a AAA rating.
Even a modest downgrade of MBIA (et al) ripples through the market like a boulder tossed into a pool. Various large banks who are holding a lot of paper (including muni paper) insured by MBIA (et al) will have to take write-downs because MBIA is no longer carrying a AAA credit line, which means that the insurace “wrapper” around the bonds they’ve insured is sometimes lower in financial rating than the bond the wrapper was insuring.
A downgrade like this:
http://investor.mbia.com/phoenix.zhtml?c=88095&p=irol-newsArticle&ID=1168119&highlight=
Is like throwing a hand grenade into a wading pool.
Without a AAA rating, MBIA’s business model is compromised; the reason why any government sovereign (eg, city, state, county, etc) would buy muni bond insurance is because MBIA (or other monoline) has a AAA rating, which would allow the issuing political entity to offer the bonds at a lower interest rate.
But with a downgrade of five levels, to A2 on watch negative... pfah. There’s plenty of counties and states with a credit rating higher than what MBIA now has as a result of the ratings cut, and there is no reason for a Aa1, Aa2, Aa3 or A1-rated county to give MBIA (et al) a chunk of money to “wrap” their muni bond.
So there goes MBIA’s bread-n-butter business and income, which will lead to further problems in a short while, because what was the problem again? Oh, yes, MBIA is short of capital - which is what results from profits, which is what comes from their bread-n-butter business, wrapping muni bonds.
It is easy to see why Moody’s put on the “creditwatch negative” — they knew that slashing the rating would result in a hit to MBIA’s business model and cause more problems down the road.
Why give them money?
Can’t the government do to them the same thing they did to Chrysler in the early 1980’s?
IE - give them a low-interest government loan and then have them pay it back over time.
ACA Capital Holdings Inc., the bond insurer that lost its investment-grade credit rating in December, won a fifth forbearance from its trading partners on $60 billion of credit-default swap contracts.
Counterparties waived collateral requirements, termination rights and policy claims against ACA Financial Guaranty Corp. until July 15, the New York-based bond insurer said in a statement distributed on Business Wire. The fourth forbearance agreement had been extended to June 20.
* * *
On Jan. 17, Merrill Lynch & Co. wrote down $1.9 billion in securities it had tried to hedge through ACA. Canadian Imperial Bank of Commerce had to sell more than C$2.75 billion ($2.7 billion) in stock to investors to rebuild its balance sheet after taking writedowns tied to ACA guarantees.
Smoke and mirrors. FUD.
I agree with that completely.
I was making the point about being in favor of reasonable regulation.
Do you believe Jim Sinclair when he says, "notional value becomes real value when either counterparty to the OTC derivative goes bankrupt"?
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