dlaw

http://financialroadtosocialism.blogspot.com/
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+5 / -6

138 Comments

    • Fri Nov 21st 20:27 PM | Rating: 0 0
      Commented on:
      Berkshire Hathaway Credit Risk, Index Puts Are Overblown Worries

      I'll bet Goldman Sachs sold him the derivatives.

      Then they sold him the company.

      Nice trade.
      View article »
    • Fri Nov 21st 17:53 PM | Rating: +1 0
      Commented on:
      Buffett's Gamble: $40 Billion Bet on Volatility
      Muzie,

      The kid is saying that Buffett is profiting from the bull market in volatility.

      In fact, Buffett is GETTING KILLED by the bull market in volatility on an enormous portion of these puts.

      Repeat: Buffett was on the WRONG side of the volatility trade in 2007.

      Do you not get that???


      On Nov 21 05:34 PM Muzie wrote:

      > dlaw: They expire TWENTY FREAKIN' YEARS FROM NOW.
      >
      > There's no "bath" taken because he's not going to trade in or out
      > of them. Your "bath" is simply he could have written off those same
      > puts for more money now then before. That's like saying he's taking
      > a "bath" because he could have bought a rising stock for the lowest
      > possible price but instead bought it 10$ more while turning down
      > a profit.
      >
      > You wake up!
      View article »
    • Fri Nov 21st 17:06 PM | Rating: +1 0
      Commented on:
      Buffett's Gamble: $40 Billion Bet on Volatility
      Author, read the Berkshire letter again.

      Buffett sold many of these puts when volatilities were much, much lower, therefore he was on the wrong side of the volatility trade. You want to be a buyer of long-dated options as the VIX goes up.

      Buffett has taken a bath on these options.

      Wake up.
      View article »
    • Thu Nov 20th 19:53 PM | Rating: 0 0
      Commented on:
      The Smoking Gun of the Credit Crisis: FICO
      The thing I do blame Fannie and Freddie for is not taking the AUS data and having it analyzed with sophistication. There should have been logs of multiple logins, changes in info, and data that did not fit statistical norms.
      View article »
    • Thu Nov 20th 19:45 PM | Rating: 0 0
      Commented on:
      The Smoking Gun of the Credit Crisis: FICO
      Gemonk, You still have to account for the fact that Fannie and Freddie have LOWER default rates than the private banks. LOWER.

      Here's a quote from an industry group about the new Desktop Underwriter 7.0:

      "Stop fraud
      Other changes are intended to deter fraud. For example, during the boom times, brokers were known to submit a borrower's application repeatedly, fudging the debt and income numbers each time, until Desktop Underwriter granted an approval. DU 7.0 is believed to limit the number of times that the financial figures on an application can be changed; after that, the application is locked out, similar to the way an ATM will reject your card if you enter the wrong PIN multiple times"

      In other words, brokers were gaming the system.

      And Gemonk, it is not as if a bank is IN ANY WAY required to lend just because Desktop Underwriter says it's okay. DU does not suddenly take the money out of a bank's Federal Reserve account and do an instant closing. It's a tool - one that was badly, badly misused.


      On Nov 20 05:46 PM gemonk wrote:

      > I have been a mortgage underwriter for many years. FICO is a big
      > issue, but even more so is AUS - the automated underwriting sysytems
      > used by the GSEs. Fannie uses Desktop Underwriter (DU), Freddie
      > uses Loan Prospector (LP), and others have their own in-house systems
      > modelled on the GSEs.
      >
      > Once the AUS made a buy decision, it was virtually impossible to
      > overturn, even if you knew there was something not right about the
      > findings. Between 2000 and 2006, underwriting standards became slacker
      > and slacker, and a higher and higher proportion of loans were approved
      > by AUS.
      >
      > I also underwrote sub-primes for the wall street investors. They
      > did not ever want to hear "this is not a good loan". they bought
      > all this trash knowing it was trash - "the model accounts for fraud
      > and lower credit quality" they said repeatedly. Whistling past the
      > graveyard...
      View article »
    • Thu Nov 20th 12:31 PM | Rating: 0 0
      Commented on:
      The Smoking Gun of the Credit Crisis: FICO
      Thanks for the comment.

      FICO over-predicted and, of course, FICO under-predicted default rates. And yet FICO was totally trusted as the underpinning to all the major securitization markets.

      No wonder we have a problem and no wonder our paper is not trusted.

      View article »
    • Wed Nov 19th 19:36 PM | Rating: 0 0
      Commented on:
      Betting on Goldman's Future
      Hmm, do you think Paulson's assessment that we might need some of that TARP money later might have something to do with his knowledge of GS?
      View article »
    • Wed Nov 19th 19:32 PM | Rating: 0 0
      Commented on:
      Will Berkshire Lose Its Triple-A?
      More denial in the comment field.

      So far, the CDS market has been prescient about imminent collapses.

      From Berkshire, we will, of course, hear nothing but lies as we head nothing but lies from every single doomed financial firm. And of course everyone on Wall Street will believe the lies.

      What choice do they have? Blame themselves?

      And of course Warren Buffett cannot be wrong. It's not physically possible in the minds of most in the investing world.

      I don't know what the truth is but before people start blaming the ratings agencies for committing "financial terrorism", I would remind people of this: Berkshire OWNS an interest in a rating agency.

      So wouldn't it be just as logical that the ratings agencies had covered up for him?
      View article »
    • Wed Nov 19th 16:23 PM | Rating: 0 0
      Commented on:
      7 Key Points About Deflation
      Carey_Jim, I think you'll find that deflation is so rare that it is actually correct to "conflate" deflation and depression - particularly if you are getting deflation at a time when the government is expanding the monetary base as fast as it possibly can.

      The theory of differential accumulation suggests that growth does tend to be associated with low inflation and stagnation with higher inflation and the currency-corrected, international data more-or-less bear this out. Inflation is essentially constant in a fiat-money world, which is fine. The money economy should anticipate the real economy and the real economy generally grows. So deceleration in inflation is the equivalent of the mild or normal "deflation" and most often this comes when the real economy is starting to outpace the money economy.

      However, real, noticeable deflation is, I think, what you would call "hyperdeflation&q... And hyperdeflation is bad because it is a self-propagating dynamic. Essentially, the price system starts to misprice the economy so consistently that it brings the economy down with it.

      View article »
    • Wed Nov 19th 14:45 PM | Rating: 0 0
      Commented on:
      7 Key Points About Deflation
      I find it comical that after the development and then collapse of a relatively unregulated "shadow banking system" - leading to a likely devastating deflation - the right-wing ideologues are not only trying to blame the government but trying to haul us back into a centuries-outdated nonsense about gold being "sound money".

      As a commodity, there is nothing special about gold any more. There is no reason to use gold as the commodity to back money even if - for whatever reason - you believed that was a good idea.

      Gold worked as a money-commodity because of the human factor and that is the only reason. Fiat money simply acknowledges the self-evident and inarguable truth - that money is a creation of people - and stops messing with the yellow stuff.

      There needs to be and will be market discipline on the monetary system - and it will be by governments in concert with the market in a fiat system. Reading these predictions of the demise of fiat currency reminds me so much of my old Marxist friends who used to predict the demise of capitalism. Laissez-faire ideologues have been telling us that with Keynes and no gold we were all doomed - all during the greatest expansion in global wealth in human history.
      View article »
    • Tue Nov 18th 19:32 PM | Rating: 0 0
      Commented on:
      Credit Default Swaps, Counterparty Risk and Free Markets
      Your point makes no sense.

      The centralization of counterparty risk through an exchange reduces the threat of netting effects, and therefore reduces overall counterparty risk. Your use of "correlated" and "uncorrelated&quo... is a canard for a specious argument that somehow OTC markets handle risk better. In fact, exchanges create more information and better access to it as an information clearing house. This reduces asymmetry, increases liquidity and does away with unnecessary secrecy and uneconomic profits.

      The argument you present for an OTC approach is a non-argument.
      View article »
    • Wed Nov 12th 16:48 PM | Rating: +2 -1
      Commented on:
      Let's Clarify "The Worst Economy Since...." Debate
      Unemployment will be in double digits before the end of 2009, I think, so this is just more (of the more and more and more and more and more) denial and silliness of people who can't let go of their precious assumptions.

      The author is in danger of becoming a contrary indicator.
      View article »
    • Mon Nov 10th 14:48 PM | Rating: +1 -1
      Commented on:
      Be Very Afraid of Deflation

      Great article!

      All the disbelief talk almost perfectly mirrors the talk from the Right when the Great Depression started - actually years into it.

      What a lot of people have forgotten is that there were Hooverites who were still saying there was no Depression up until WW2. They talked about how it was just loafers and panickers and how laissez-faire and gold would fix everything.

      That's what they will always say. Evidence means nothing to them. They already know who is to blame for everything before they even know the problem and there is no standard of proof that they will accept to disprove their theories. They are all true a priori.
      View article »
    • Mon Nov 10th 12:21 PM | Rating: 0 -1
      Commented on:
      U.S. Is Playing Financial Dominoes
      Look at the numbers the author is proposing and you'll see that they are ridiculous.

      We're going to pay down more than $20 trillion in debt? That's "normalcy"??...

      Well, the answer is simple, then, we will NEVER get to Mr. Merkel's "normalcy". He might as will just right "I understood the economy of 50 years ago, but I don't understand the present one. Until we get back to the one I understand, I don't know anything."

      Or, more simply put: "I don't know anything."
      View article »
    • Sun Nov 9th 14:22 PM | Rating: 0 -2
      Commented on:
      The Winners Will Be Those Who Look to Gold and Commodities

      I think the problem with the author's view is that inflation will NOT filter into the economy because we're suffering from deflation.

      In which case, owning things like gold is not a good idea.




      On Nov 09 01:53 PM Dan Lewis James wrote:

      > I have been following this train of thought for a while now and believe
      > it to be correct. I own physical Gold ETF's and have exposure to
      > agriculture.
      >
      > As a question though, does anyone have an idea what time frame we
      > may be looking at for inflation from the bailout's to filter into
      > the economy? Any ideas would be good.
      View article »
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