Tuesday, July 03, 2007

Profile in Success

We've seen the results of "fake it til you make make it" and we just can't seem to get enough. Okay, 12 step time. First step is to admit we have a problem. Schadenfreude is the common symptom. [Points shall be awarded not for firstiness but for the first correct instance of the English synonym of schadenfreude.] Anyway ENs step 2 in the recovery process is to read about success and feel good for the person. Today we have one such example.
BOND TRADER JOHN DEVANEY has built an estimated $250 million fortune by taking risks that Wall Street firms avoided -- betting big on chancy structured bonds amid a wave of post-Enron defaults and snapping up airline debt following the 9/11 attacks. Lately, he has been buying pools of subprime mortgages in the midst of a housing market implosion.
"Bond trading is my bread and butter, and I'm very good at it," he says.

$250 million in the same time Casey went from Rammit fraud to serial mortgage fraud. Come on try it. Say "good on ya mate." Doesn't everyone love a success story? And what a story it is. The excerpts here are from an article just two weeks ago in "Institutional Investor magazine. Let's hear more:
Devaney's holding company, United Capital Holdings, comprises several hedge funds and a portfolio of mansions, jets and luxury yachts that Devaney uses himself and UCH leases for profit and tax benefits.
His 100 foot yacht is called the Positive Carry. Ahhh yes the good life but like "7 Digit Serin" and "8 Digit David" before him itsallgood things come to an end. "9 Digit John" was forced this week to exercise a clause in his hedge fund and prohibit redemptions. Welcome to your Hotel Speculation. You can check out anytime you want but you can never leave. Bloomberg has more on this and the subprime non-containment but no word on yacht.

45 comments:

Anonymous said...

First and murst!

someotherpersonaltogether said...

Anons don't count.

The Dude said...

Jeez....anonypussy first.

Lame

Anonymous said...

@The Dude

No need to resort to name calling. Even if you did come in third.

Anonymous said...

surst

schadenfreude=rob dawg

Anonymous said...

https://www.tdnam.com/trpItemListing.aspx?&miid=7719233

10% daily price dropped

10% for fishy treats!

10% for galina divorce fund!

casey's blog worth 100K

no way

someotherpersonaltogether said...

"Hedge funds may have the most to lose on securities back(ed?) by subprime loans, the Bank for International Settlements said in its annual report dated June 24."

Obviously the result of research funded by a gevernment grant.

loveagoodtrainwreck said...

In honor of Casey think we should coin the term.."Schaden-fraud"

German-English translations for "Schaden {m}Maskulinum (der)":

damage
detriment
mischief
disservice
harm
prejudice
disadvantages
disadvantage


fraud /frɔd/ Pronunciation Key - Show Spelled Pronunciation[frawd] Pronunciation Key - Show IPA Pronunciation
�noun 1. deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage.
2. a particular instance of such deceit or trickery: mail fraud; election frauds.
3. any deception, trickery, or humbug: That diet book is a fraud and a waste of time.
4. a person who makes deceitful pretenses; sham; poseur.

Benoit™ said...

@ Rob Dawg -- [Points shall be awarded not for firstiness but for the first correct instance of the English synonym of schadenfreude.]

I believe the word is epicaricacy. :)

Rob Dawg said...

I am constantly trying to educate myself on these exotic financial products. No matter how hard I try I come up with only two answers. One that they exist solely to generate fees. Two that after all the fees the only way to generate superior returns is by selling the same thing to more than one person. Think Mel Brooks' "The Producers."

Rob Dawg said...

Benoit™ you win. That is exactly the word I was going to use but got nervous after the "nadir" affair.

king friday the 13th said...

>> 7 digit Casey

>> 8 digit David

>> 9 digit John

10 digit Bear Sterns

11 digit Fannie Mae

12 digit JP Morgan Chase

13 digit US Treasury

cause this is gonna take several TRILLIONS to fix. The S+L's took 12 figures, and this is an order of magnitude worse.

someotherpersonaltogether said...

"That is exactly the word I was going to use but got nervous after the "nadir" affair."

You were right to be nervous. Your cover is coming undone.

NH Steph said...

Isn't it epicaricasey?

The Dude said...

No need to resort to name calling. Even if you did come in third

....that, from an Anonopussy! ROFLMAO

someotherpersonaltogether. said...

"epicaricasey"

That post wins. Thread over.

piedpiper said...

I see situations like this all the time and first realized the extent of the housing bubble on the market side a few years ago. I've worked in fixed income institutional sales & trading for about 10 years now and I was looking for a job. Having some experience with mortgages & structured product, I was lucky enough to land interviews with two of the top firms out there for a potential job.

The first guy began the interview by telling me how hard it was to find someone good, and that he'd just offered a 25yr old junior trader at another shop $500k a year to come join him and the kid said no, that even though the firm was an upgrade he wouldn't take the pay cut. That was the first sign I got that things were getting a little frothy.

The second guy represented an amazing opportunity...a job which I'd always wanted and a name on the resume which brings unassailable credibility. The problem was that I didn't share his sanguine view of the markets. I believed that there remained an excellent opportunity for investors to make money in the markets but caution was warranted given some of the exuberance I'd been hearing about. He wanted to hear none of it. He ultimately offered me a lesser job and I passed. Given the shakiness of the markets these days I have to say I'm happy I stuck to my view as I could well be looking for a job again had I landed there.

Anonymous said...

@The Dude

Keep it up, and I might have to ask my legal army to look up the definition of the word 'libel'.

Benoit™ said...

Benoit™ you win. That is exactly the word I was going to use but got nervous after the "nadir" affair.

Forget epicaricacy, you'd be surprised how many people have never heard of the word "schadenfreude" in the first place.

Now for 3 bonus points™, let's hear the word for the opposite of schadenfraude -- the feeling of sadness at someone else's good fortunes! (Truthfully, I don't think there is such a word in English)

baa said...

I've always maintained that schadenfreude is a uniquely German word that has no adequate translation into English.

That being said, it could said either to be a "shameful joy" or "joy in the misfortune of others". it's somewhat inelegant in English, and I'll stick to the German.

Northern Renter said...

Geez people,
Given the subject matter here and the way that Caseyworld tends to warp reality, I think that the proper word/spelling must be "Schadenfraud". Thank you.

NR

PS One long weekend with my family and then I come back to a blizzard of Snowflake news. Can't a guy get any rest?

mejustme said...

In Buddhism, the concept of mudita, "sympathetic joy" or "happiness in another's good fortune," is often explained as the opposite of schadenfreude.

OK, I lifted that from Answers.com. I had to look up epicaricacy. But from now on, it's epicaricasey all the way!

mejustme said...

Schadenfraud, another good one.

mejustme said...

I always loved this quote, which has been attributed to an assortment of people:

"It is not enough that I succeed. My friends must also fail."

Rob Dawg said...

You guys are reading my mind this morning. Yes, king you "ruined" a post for later. Oh well, can I just put your list up as a starting point?

The schadenfraud observation is a good one. These are not misfortunes these are deliberate consequences of reckless behavior.

Benoit™ said...

OK Alex, I'll take "ambiguous nicknames" for $200...

And the answer is -- "9 digit John

"What is the prostitute's name for her amputee client?" ;-)

Rob Dawg said...

It's a safe bet that it won't be long before Casey cannot count up to 21 anymore.

Serin is as Serin does... said...

"It's a safe bet that it won't be long before Casey cannot count up to 21 anymore."

Why? Did another "supporter" pay for him to go through w/a M to F operation? Enquiring minds want to know! ;)

Dan said...

At 8:13 AM, Benoit™ said...

"Now for 3 bonus points™, let's hear the word for the opposite of schadenfraude -- the feeling of sadness at someone else's good fortunes! (Truthfully, I don't think there is such a word in English)"



gluckschmerz = sorrow at someone's good luck.

Google knows all!

Anonymous said...

Wo sind die Deutchers?? Sind alle Deutcher?

Benoit™ said...

Why? Did another "supporter" pay for him to go through w/a M to F operation?

No, he can't count to 21 anymore because he's huddled in a corner of his room, nervously sucking his thumb...

Holiday Inn said...

Malicious glee or gloating sound good to me.

http://www.answers.com/topic/schadenfreude

GassyKnoll said...

I go back and forth between feeling sorry for Serin, and wishing him a slow and painful death.

It has been decided. He must pay.

I hope that little peckerhead is squirming!

Zintradi said...

with this losmit lawsuit, I kind of analogize it to a bunch of people waiting around a buffet table and no one has said "dig in" so losmit is taking the first plate and starting the line... hopefully more people will get in line and take a piece...

kind of a rough analogy, I know.

Anonymous said...

At 9:41 PM, LossMitPro said...
Seriously though, just thought I’d pop in here and say thanks. Read your responses with a healthy laugh, shaking my head at the Casey-fix withdrawals. Apparently, some folk THINK I’m obligated to do or share or act according to THEIR misplaced and uninformed notions. And ”I’M” called creepy?
~Mark

Hey why bother posting in here then. You claim to actions then fail people want you to be accountable. Everything about you screams internet whore. I dont give a rats ass if you have a screen name. You walk/talk like an anonapussy.
~someone

Anonymous said...

re 8:13

Now for 3 bonus points™, let's hear the word for the opposite of schadenfraude -- the feeling of sadness at someone else's good fortunes! (Truthfully, I don't think there is such a word in English

OJenvy ???

(Ex) Train Wreck Watcher said...

@Benoit™: "Now for 3 bonus points™, let's hear the word for the opposite of schadenfraude -- the feeling of sadness at someone else's good fortunes! (Truthfully, I don't think there is such a word in English)"

What, you mean a word other than "resentment"? :D

@piedpiper:

Thanks for your insights. It grates to realize how much rank novices are making on Wall Street these days--but, in keeping with the thread's theme, I harbor a secret guilty pleasure at the thought that they will, just like their tech bubble counterparts, soon be left with nothing but oversized bills that they can't pay. Wall Street, and the hedge funds in particular, are set for a very big downsizing once the party ends.

@Rob: "I am constantly trying to educate myself on these exotic financial products. No matter how hard I try I come up with only two answers. One that they exist solely to generate fees. Two that after all the fees the only way to generate superior returns is by selling the same thing to more than one person. Think Mel Brooks' "The Producers.""

I think in short order we're going to see a scene playing out in real-life courtrooms just like the closing scene in The Producers:

BIALYSTOCK: "And may I humbly add, your honor, that we have learned our lesson and we'll never do it again."

(Prison)

BLOOM: "Twenty-five dollars. Here's your receipt. You now own 28% of'Prisoners of Love.'"

Is it possible to do zero-down cashback-at-close deals on prison contraband? :D

bluto said...

Benoit
That's easy, envy.

Rob
Exotic securities exist generally for two purposes, the first is to transfer risk from one entity to another. Essentially these are insurance contracts (some of these are complex--imagine hurricane insurance that covered damage due to tropical storms and hurricanes but stopped coverage if a Cat4 or above formed). The other major group are just repackagings of other securities to meet someone's needs. The first example is one of the easier to understand, so we'll use it. Pension funds and speculators have very different goals and vanilla mortgage backed securities (like a GinnieMae bond) doesn't really meet their needs very well. (Pensions don't like the prepayments and the return isn't exciting enough for a speculator).

If you were to take 100 bonds and split the cash flows into three groups (which because finance people are generally from Brooklyn but want desperately to fit in with their neighbors in Manhatten they pick a fancy French name, tranches).

In the first tranche we'll assign all of the interest payments, but no principle payments. For these speculators might pay 30% of par (what we paid for the bonds)depending on where they think interest rates are likely to go.

In the second tranch we'll include 50% of the principle payments, but all prepayments will be assigned to this pool first. This is the speculative tranch, and it might sell for 30% of par.

In the last tranch we can assign the last 50% of principle payments. Because these are more predictable they will sell for more say 45%. If you add, those together the total is 105%. The divisions became increasingly complex which greatly increases the likelihood that someone doesn't understand what they've bought and will be getting screwed pretty soon.

Many of the most recent splits depend on the assumption that housing is local markets and by selecting loans from across the country you have better insulated your credit risk. If this assumption is flawed, there will be a large amount of investment grade paper that soon will be much lower in credit rating.

(Ex) Train Wreck Watcher said...

@Bluto: "Many of the most recent splits depend on the assumption that housing is local markets and by selecting loans from across the country you have better insulated your credit risk. If this assumption is flawed, there will be a large amount of investment grade paper that soon will be much lower in credit rating."

Interesting comment. What did in LTCM was the assumption that the global markets would move independently of each other, and therefore that spreading out positions among global markets would lower the volatility. When global markets began moving in sync, their heavily leveraged positions moved against them and they lost big.

I suspect, as you do, that the mortgage-backed securities industry has made the same assumption with respect to regional housing markets. When it turns out that housing has become not just national, but even global, the high concentration of risk will lead to even more losses in the MBS industry.

Bluto said...

ETWW
That's the core assumption in modern portfolio theory, that correlation between two assets is somewhat stable. It almost never is in reality (especially in a crisis). LTCM was done in by not having enough capital to weather the crisis their positions as a whole returned to make money (Buffett whines about not buying the on/off the run Treasuries). Having capital is expensive and one of the most difficult things to do when times are good.

piedpiper said...

(Ex) Train Wreck Watcher...I think you're dead on that the Wall St. cycle has peaked and we're in for some bloodletting.

I'm already of hearing of hiring freezes (GS), companies deferring new incoming analyst classes (BoA) and seeing prop guys dropping off bloomie like they were never there to begin with. My feel is this is going to take years to unwind and rates have to go higher which will only exacerbate the problem. Should be interesting to see how this affects NYC real estate...co-op rules have kept the lid on mortgage magic for the most part but most new construction seems to be condos. Anyone catch the NYT article on the $3.5mm mortgage becoming commonplace this week??

Rob Dawg said...

Bluto,
Excellent comments. Anytime you want a top post just ask. My bitch is simple. Mark to market. I think they used tranches to specifically conceal cummulative risk by marketing it as diluted risk. It isn't some untested theory. aggregateed risks are lower than the sum of of cumulative risks and vice versa. They lied about the risk by pricing these products in an uncompetitive and opaque illiquid market.

(Ex),
LTCM 's problem is the tip of the iceberg for MBS. In addition to exposure to global factors like LTCM the MBS are also unable to balance their regional exposure. The bubble markets by definition are sure to overweight by several times and no amount of conservative Kansas mortgages can offset that weighting.

piedpiper said...

Perhaps all we need is a good election to tame CPI. Worked in Nigeria!

http://abc.net.au/news/stories/2007/07/03/1968506.htm?section=justin

Machete market collapses after elections
Posted Tue Jul 3, 2007 12:23pm AEST

The price of machetes has halved in parts of Nigeria since the end of general elections in April because demand from thugs sponsored by politicians has subsided.

The state-owned New Agency of Nigeria (NAN) surveyed prices in the north-eastern state of Gombe and found that a good quality machete was now selling for 400 naira ($3.50) compared with 800 naira ($7) before the elections, which were marred by politically motivated violence in many states.

"A price survey on machetes, which served as a popular weapon among political thugs in the state, indicated a drop in the price of the implement," NAN reported over the weekend.

Machetes are primarily used as a tool for farming in Nigeria but they are also popular among political gangsters.

"Before the conduct of the general elections, I was selling a minimum of seven machetes daily but can hardly sell one a day now," said Usman Masi, a trader quoted by NAN.

-Reuters

bluto said...

They lied about the risk by pricing these products in an uncompetitive and opaque illiquid market.

That's how you make your bonus, man.

It's not as if the investment banks were selling these to widows and orphans. Folks like Ralph Cioffi would have a very difficult time proving they were fooled by the structure.

Rob Dawg said...

Amazing how these posts end up refering to each other? Good one bluto.